Tag: partnership

November 8, 2024

partnership Archives – Page 2 of 5 – Professional Transition Strategies

dentist in office

Exciting changes are sweeping through the dental industry, thanks to the rise of dental service organizations (DSOs). With over 375 DSOs now operating in the U.S., this transformative era is creating new opportunities for dentists and elevating the standards of patient care (1). DSOs are not just reshaping practice ownership; they’re transforming the landscape entirely by fostering a culture of innovation and forward-thinking strategies and opportunities for practice growth and development.

 

The Rise of DSOs: A New Era in Dental Care

Fueled by private equity investments, dental service organizations (DSOs) are rapidly acquiring individual practices, leading to a trend of consolidation that’s allowing dentists to sell their practices for better financial returns and less administrative burdens (2).

Factors like the skills gap among baby boomers and changing demographics have created a favorable environment for DSOs. As many baby boomer dentists approach retirement, there’s a growing demand for successors to take over their practices. However, younger dentists face challenges such as high student loan debt and limited resources, making solo practice ownership less appealing. DSOs are an attractive option, offering established support systems and financial backing that ease the burdens of practice ownership.

The demographic shift in the dental workforce also means that a new generation of practitioners is looking for flexibility and work-life balance, which DSOs can provide through centralized management and operational support.

In addition, private practitioners are struggling to navigate macroeconomic challenges that affect many industries today, especially workforce stability. Traditionally, dentists followed a predictable career path, but many are now prioritizing the job security and structured benefits that DSOs offer over the autonomy of owning a private practice.

This alignment between the needs of new dentists and the resources and stability that DSOs offer is fueling the trend of consolidation. According to the ADA, 13% of U.S. dentists are now affiliated with DSOs, with the number rising to 27% among younger practitioners who graduated five or less years ago (3).

This trend will continue as DSOs acquire more practices. Our experts predict that DSO’s will continue acquiring practices, with the dental industry potentially seeing up to 70% consolidation in the next five years, permanently and significantly altering how dental care is delivered (4).

Why More Dentists Are Choosing Partnership With DSOs

Dentists now have a wealth of new options and flexible paths that were previously unavailable. Today, they can choose from a variety of partnership models when they work with DSOs, which allow them to maintain a level of control while benefiting from the extensive resources these organizations provide.

For example, two great deal structures for dentists contemplating a sale are equity rolls and joint ventures. Equity rolls involve dental entrepreneurs exchanging a portion of their practice equity for a financial stake in the DSO. This arrangement allows them to participate in the DSO’s growth and success while still retaining some ownership in their practice. It not only provides immediate financial benefits but also aligns the doctor’s interests with those of the DSO, creating a partnership that fosters mutual success.

Joint ventures (JVs) allow dentists to retain a stake in their practice while also receiving a substantial lump sum at the time of the sale. This structure enables them to benefit from the ongoing success of their practice while having immediate access to capital, which they can use for personal investments, such as funding their children’s education or pursuing other financial endeavors.

An increasingly attractive model is the sub-DSO. In this arrangement, practice owners exit debt-free with a significant upfront payment and typically retain a 40% ownership stake and profit share in the sub-DSO portfolio. Unlike traditional models, sub-DSOs allow for equity to be held separately, facilitating growth and expansion. This approach offers multiple return avenues, including equity gains and profit sharing, making it a lucrative option for dentists looking to enhance their overall wealth.

Options like these provide dentists with flexibility in structuring their financial future, whether they want to scale their practices or transition smoothly into retirement.

By joining a DSO, dentists gain access to centralized support in areas like marketing, billing and human resources, allowing them to focus on clinical care rather than the complexities of practice management.

Many dentists are drawn to DSOs for the opportunity to offload these managerial responsibilities and concentrate on what they do best: patient care. DSOs relieve doctors from the burdens of running a business, including managing payroll, hiring staff and navigating regulatory issues. In addition to operational support, DSOs often provide higher financial returns when selling practices compared to individual buyers, mainly due to their private equity backing.

For some dentists, the decision to partner with a DSO is driven by the flexibility and growth opportunities they provide. Rather than shouldering the financial and operational risks of owning a practice, they can enter a DSO partnership that enables them to focus on clinical work and even pursue executive leadership roles within the organization if they choose (5).

One of the most significant changes DSOs have brought is in the area of patient care. Traditionally, solo practitioners managed every aspect of their practice, and it can be difficult to keep up with technological advancements. DSOs, however, have the resources to invest in cutting-edge technology, improving diagnostic tools, treatment options and overall patient experience.

This means better care through more accurate diagnoses, less invasive treatments and faster, more efficient procedures. Additionally, DSOs can offer extended office hours, flexible payment plans and a wider range of services under one roof, making dental care more accessible and convenient.

Moreover, DSOs are increasingly fostering “whole-person” care by integrating dental and medical services. This holistic approach benefits patients, ensuring that their oral health is not treated in isolation but as part of their overall well-being (6). By partnering with medical professionals and leveraging their scale, DSOs can help lead the charge in transforming how dental care is delivered.

Technology plays a critical role in the success and expansion of DSOs. These organizations are often quick to adopt innovative technologies, ranging from digital X-rays and electronic health records to teledentistry platforms. This ability to invest in cutting-edge innovations gives DSOs a significant advantage over independent practices, many of which struggle to keep pace with the high costs of technology upgrades.

In addition to foundational tools, DSOs can advance practices with new technologies such as artificial intelligence (AI) to support dentists and front-office staff (7). AI enhances workflow efficiency, improves patient communication and optimizes appointment scheduling. 3D printing is revolutionizing restorative dentistry with the rapid production of crowns, bridges and other dental appliances, significantly reducing turnaround times and improving fit (8). In cosmetic dentistry and orthodontics, augmented reality (AR) is emerging as a powerful tool for treatment planning and patient education, helping patients to visualize potential outcomes and understand their procedures better (9).

Finally, by centralizing data management and integrating electronic systems, DSOs can ensure consistent quality of care across all affiliated practices. It’s a technological edge that not only differentiates DSOs from independent practices but also enhances their ability to provide high-quality, patient-centered treatment. Overall, the strategic use of technology is pivotal to the ongoing growth and success of DSOs in the evolving dental landscape.

How DSOs are Refining the Business of Dentistry

DSOs are refining the “business side” of dentistry. By consolidating administrative functions and optimizing cost structures, DSOs have made dental practices more profitable. Their financial success allows them to reinvest in their practices, further enhancing the services they offer to patients.

These organizations streamline operations by centralizing administrative tasks, resulting in more efficient, standardized workflows across their affiliated practices. This model not only enhances operational efficiency but also improves profitability for dentists, since DSOs can leverage economies of scale.

For example, DSOs negotiate better rates on supplies and services, reducing operational costs. They also offer marketing support, helping practices attract more patients through targeted advertising and online presence management. By refining business practices and offering comprehensive management solutions, DSOs allow dentists to maximize their earnings while maintaining clinical autonomy.

The Cultural Shift: How DSOs Are Transforming Dental Practices Environments

Traditionally, dental practices were small, family-owned businesses that operated independently. Increasingly, DSOs are recognizing the importance of maintaining the unique culture of each practice they acquire to help both staff and patients feel comfortable with the transition.

As more practices join DSOs, a culture of collaboration and growth is also emerging. For example, some DSOs provide various opportunities for professional development beyond clinical work, such as pathways into executive leadership roles and participation in clinical advisory boards (5). These roles may come with performance-based bonuses and the chance to mentor new dentists, creating a rewarding environment where experienced practitioners can share their knowledge and skills. Certain DSOs may offer training, and career development pathways, making them an attractive option for the next generation of dental professionals.
By focusing on growth and development opportunities, DSOs can foster a sense of community within their organizations. This collaborative environment helps dentists achieve professional fulfillment, personal satisfaction and meaningful connection to their work.

What Drives Practice Value When DSOs Evaluate Your Business?

When DSOs assess practice value, they look beyond basic revenue numbers to examine key performance indicators that predict long-term success. Patient retention rates, treatment acceptance percentages, and recurring revenue from preventive care all factor heavily into their calculations. Location demographics, competition density, and growth potential in your market also influence valuation significantly.

DSOs particularly value dental practice operations with strong operational systems, experienced staff, and established referral networks that can integrate smoothly into their existing infrastructure.

Why Some Practices Are More Attractive to DSO Buyers Than Others

Certain practices are naturally more appealing to DSO acquisition teams. Multi-specialty practices with diverse revenue streams often command premium valuations because they offer cross-selling opportunities and reduced risk.

Practices with younger patient demographics and strong digital presence rank higher due to growth potential. Additionally, practices located in underserved markets or strategic geographic areas become prime targets for DSOs looking to expand their footprint and capture market share. The combination of these factors can significantly impact your negotiating position.

How DSO Partnerships Impact Your Patients and Care Quality

Patients often benefit from DSO partnerships through improved access to advanced technology and extended service hours. The centralized resources allow for faster implementation of new treatments and diagnostic tools that individual practices might struggle to afford. However, maintaining the personal touch that patients value requires careful attention during the transition process to preserve existing relationships and care standards.

How Private Equity Backing Changes DSO Acquisition Strategies

Private equity funding enables DSOs to pursue more aggressive acquisition timelines and offer competitive purchase prices that individual buyers typically cannot match. This financial backing allows DSOs to focus on strategic market positioning rather than immediate profitability, often resulting in higher price offers for practice owners during the current consolidation wave.

Common Questions

Yes, DSOs are at the forefront of the consolidation trend in the dental industry. This wave of consolidation is not merely a shift in ownership; it reflects a broader transformation in how dental care is structured, managed and delivered. With their capacity for scalability and resource allocation, DSOs are redefining the competitive landscape, ensuring that practices can thrive in a rapidly evolving environment.

The rise of DSOs has prompted regulatory changes across the dental industry. As these organizations continue to expand, they attract increased scrutiny from regulatory bodies to ensure quality of care, patient safety and fair competition.

In Becker’s Dental Review, Ronald Perry, DDS, emphasizes that, “regulatory scrutiny may increase to ensure quality of care and patient safety within the dental industry” (10). This heightened oversight is intended to address concerns about the corporate practice of dentistry and its implications on patient-provider relationships.

Scott Pope, DDS, notes in Becker’s Dental Review that DSOs face regulatory challenges related to “patient privacy and billing practices,” highlighting the complexities of navigating compliance standards across various jurisdictions (10). The evolving regulatory landscape means that DSOs must continuously adapt to meet the requirements of the regions in which they operate.

DSOs are also subject to scrutiny regarding their impact on clinical autonomy. To address concerns, many DSOs have adopted policies that preserve dentists’ decision-making authority when it comes to patient care. This balance between clinical independence and operational support has become a key factor in their success.

Ultimately, the influence of DSOs on the dental industry will be shaped by ongoing healthcare policy developments, patient preferences and the ability to uphold high standards of care amidst these regulatory changes.

DSOs have shifted towards more collaborative management structures, offering growth opportunities beyond clinical work. Dentists can focus on patient care while DSOs handle administrative tasks, allowing for more efficient and profitable practice management.

When considering a partnership, it’s important to evaluate the DSO’s support systems and their dedication to maintaining clinical autonomy. While some older DSOs gained a reputation for enforcing strict policies, like treatment quotas, many newer organizations recognize the importance of preserving the unique qualities and successful practices of their affiliates. They understand that the satisfaction of dental providers is one of the most important elements for the success of their investment.

However, some less reputable DSOs still operate. A knowledgeable broker can help you spot potential red flags and direct you toward more reputable DSOs that focus on clinical independence and shared success.

Bottom Line

The dental industry is undergoing a significant transformation as DSOs reshape practice operations and patient care. By providing centralized support and access to advanced technology, DSOs enable dentists to focus on high-quality care while alleviating the burdens of practice management. This shift fosters a culture of innovation and forward-thinking strategies among dental professionals, making it an exciting time to be in the field.

With DSOs rapidly acquiring practices, the current wave of consolidation is predicted to result in up to 70% of the industry being consolidated within the next five years. Now is the time to act; the window for the most lucrative partnership opportunities is closing fast.

Contact the experts at Professional Transition Strategies today to discover how partnering with a DSO can enhance your practice and support your future plans in this evolving landscape.

  1. DrBicuspid. Mythbusters: Separating DSO fact from fiction, https://www.drbicuspid.com/dental-business/dso/article/15664821/mythbusters-separating-dso-fact-from-fiction
  2. Inc. Private equity and the dental industry’s consolidation curveball, https://www.inc.com/inc-masters/private-equity-and-the-dental-industrys-consolidation-curveball.html
  3. American Dental Association. Practice modality by the numbers, https://adanews.ada.org/new-dentist/2024/web-exclusives/practice-modality-by-the-numbers/
  4. DrBicuspid. Halfway through the dental consolidation wave: Here’s what entrepreneurs need to know, https://www.drbicuspid.com/dental-business/dso/article/15667122/halfway-through-the-dental-consolidation-wave-heres-what-entrepreneurs-need-to-know.
  5. DrBicuspid. 4 key financial considerations when selling to a DSO, https://www.drbicuspid.com/dental-business/practice-sales/article/15678019/4-key-financial-considerations-when-selling-to-a-dso
  6. American Dental Association. Practice modality by the numbers, https://adanews.ada.org/new-dentist/2024/web-exclusives/practice-modality-by-the-numbers/

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August 15, 2024

The Emotional Side of Transitioning Your Dental Practice

dentist with hands folded and looking at the floor

Transitioning a dental practice, whether you’re selling or merging, is a significant milestone in any dentist’s career. This journey, while full of opportunities, is also full of emotional challenges. Understanding and addressing these often overlooked emotional aspects is key to a smooth and successful transition. This article explores the various emotional facets of transitioning your dental practice and provides strategies to manage them effectively.

Coping With the Stress of Selling or Merging

The process of selling or merging a dental practice can be overwhelming. It involves many decisions, from financial considerations to logistical details. And, it isn’t just a professional change; it’s a significant life event that can impact your mental health. On top of that, dentistry is already a stressful job, with more than half of dentists experiencing high job stress according to a study from Nature (1). Recognizing this and taking proactive steps to manage your emotional well-being is essential for a successful transition.

Identifying Common Stressors

  • Uncertainty: The unknowns associated with the transition can create anxiety about the future direction of the practice and personal career path.
  • Workload: Balancing current practice demands while planning for the transition can lead to burnout. Selling a practice typically requires about 150 hours, spreading dentists thin between clinical care, business management and transition planning.
  • Financial Pressure: Large investments or holding a significant amount of debt can be scary and overwhelming. When investing in a dental practice, enlist experts to provide critical support, such as knowledge of medical or dental competition, patient demographics and expertise in practice appraisals to determine fair market value. For potential sellers, partnering with a dental service organization (DSO) often includes “cash at close,” providing immediate financial relief to clear debts and enhance financial stability for future endeavors.
  • Concerns With Exiting a Partnership: Transitioning out of a dental practice partnership is often complex, especially when one partner plans to retire while the other intends to continue practicing. This scenario often leads to divergent paths and requires careful planning to ensure a smooth transition for both parties. DSOs can offer structured solutions and support in navigating these transitions, facilitating agreements that accommodate different career aspirations and personal goals.
  • Worries About Clinical Autonomy in a DSO Transition: Modern DSOs offer varying levels of involvement, so finding one with your clinical and cultural values is crucial to preserving professional independence and patient care standards. To find the best fit, evaluate their support infrastructure and commitment to clinical autonomy. With over 375 DSOs available, an experienced broker can help identify those that align with your values and avoid those that might impose unwelcome changes.
  • Navigating Industry Shifts: The dental industry is currently undergoing significant consolidation, with approximately 35% of practices already consolidated (3) into DSO groups. This ongoing consolidation adds stress as practitioners must act soon amidst changing market dynamics to capitalize on the current opportunity before it’s too late.
  • Choosing the Best Option: It’s stressful when weighing multiple options before deciding on the best path forward for both personal and professional goals. When considering options for transitioning your practice, especially as a potential seller, it’s essential to weigh various deal structures available with DSOs, which include options such as an equity roll, joint venture model or outright sale to a DSO. Each structure offers different benefits and considerations, such as the financial incentives discussed in DrBicuspid.com (2), operational autonomy and future growth potential.

Strategies for Managing Stress

  • Plan Ahead: Create a detailed transition plan to minimize last-minute surprises. We always recommend starting the planning process at least five years before you want to transition your practice.
  • Delegate Tasks: Delegate responsibilities to trusted staff or consider hiring temporary assistance for help running the business during peak workload periods. Clearing non-essential tasks from your plate allows you to focus more on patient care and strategic planning.
  • Prepare To Sell: Effectively prepare by conducting a practice appraisal, which identifies opportunities to maximize profitability and enhance your practice’s overall value before listing it for sale. By optimizing financial and operational efficiency, you not only enhance your practice’s appeal but also navigate the selling process with greater confidence and reduced stress.
  • Seek Professional Help: Engaging with expert brokers like Professional Transition Strategies provides strategic guidance tailored to your goals and can support you in navigating negotiations, ensuring financial transparency and devising long-term growth strategies. This personalized counsel empowers dental entrepreneurs to make informed decisions that align with their personal vision for practice ownership, alleviating stress by knowing they have the best expertise guiding them every step of the way.

Managing Staff Emotions During Transitions

Your staff plays a critical role in your practice, and their emotions and reactions during a transition can significantly impact the process. It’s essential to avoid prematurely notifying staff about potential changes before the sale is finalized. Doing so could lead to significant disruptions and uncertainties among the team. Here’s how to approach communication effectively once the sale is complete:

Transparent Communication With Staff

  • Timing of Communication: Wait until the sale is complete before informing your staff about any impending transitions or changes. Premature communication can create unnecessary anxiety and speculation. Once the sale is finalized, it becomes appropriate to inform your staff about the upcoming changes to help mitigate uncertainties and alleviate fears.
  • Keep Them Informed: Regular updates about the transition can help alleviate fears and uncertainties. Clearly explain the steps involved in the transition and what it means for the staff.
  • Highlight Benefits: Discuss the potential benefits that come with the transition, whether it’s new career growth opportunities, enhanced benefits or improved working conditions.
  • Showcase Improvements: Inform staff about any improvements that will come with the transition, such as new technology, better facilities or expanded services.
  • Provide Support: Offer resources and support to help staff cope with the changes. This might include workshops or one-on-one meetings to address individual concerns.

Staff Benefits from DSO Transitions

Transitioning to a DSO can provide your staff with numerous benefits that enhance their professional and personal lives. DSOs are structured to offer comprehensive benefits, including health care and a 401K plan, from the outset. For hygienists and other dental professionals, DSOs present a well-defined career path with clear job opportunities. This structured approach allows staff to understand and plan their potential career progression. Moreover, DSOs invest in the latest technology, which not only improves the clinical experience for staff but also keeps them engaged and motivated. Overall, DSOs provide a supportive and structured environment that can greatly enhance job satisfaction and career growth for dental practice employees.

Dealing With Uncertainty

Change, even when positive, can trigger feelings of uncertainty and fear. Recognizing and addressing these emotions is essential for a smooth transition.

Coping Mechanisms

  • Acknowledge Your Feelings: Accepting and understanding your emotions can help you manage them better.
  • Stay Positive: Focus on the benefits and opportunities that the transition will bring.
  • Seek Support: Talk to colleagues, friends or a trained professional to help process your feelings. Connecting with other dentists who have undergone a similar practice transition can provide valuable insights and alleviate fears, or help identify DSO groups that may be a good fit if you’re considering selling your practice. Understanding their experiences with different DSOs can guide your decision-making process and ease concerns about the transition. Additionally, partnering with a seasoned dental practice broker can assist in identifying your ideal buyer, easing any worries you might have.

Balancing Personal and Professional Life

A transition can disrupt the delicate balance between your personal and professional life. It’s important to find ways to maintain this balance to ensure overall well-being.

Ensuring Self-Care During the Transition

  • Set Boundaries: Allocate specific times for work and personal activities.
  • Trust Your Team: Entrust responsibilities to your team to avoid overburdening yourself.
  • Take Breaks: Regular breaks and time off can help prevent burnout.

Financial Considerations and Emotional Well-Being

Financial aspects of a transition can significantly impact your emotional well-being. Proper financial planning and management can alleviate stress and ensure a smoother transition. These steps ensure that financial considerations are carefully managed throughout the transition process, providing financial stability and peace of mind.

Financial Planning Tips

  • Merging Dental Practices: When merging practices, it’s crucial to budget for integration costs, potential redundancies and any legal or regulatory expenses involved. An experienced dental broker can help navigate the complexities of combining financial systems and aligning revenue streams to ensure a seamless transition.
  • Selling a Dental Practice: Planning for a successful sale involves conducting a thorough practice appraisal to determine its fair market value and identifying and vetting potential buyers – both groups and individuals. Seeking guidance from an expert broker can streamline negotiations and maximize financial benefits from the sale.

Creating a Transition Timeline and Checklist

DSOs fit the dentist who craves a work-life balance and don’t want the added stress of the managerial responsibilities that come along with owning a business. Working 32 clinical hours (instead of six days a week with early mornings) is appealing to both the younger and older generation, especially leading up to retirement and to avoid burnout. For those looking to ease into retirement, working for a DSO can offer an abbreviated schedule rather than the added stress of a transition to another dentist. What’s more, you have the chance to expand and move toward a one-stop-shop model, all while increasing the value of your dental practice.

Developing a Transition Plan

  – Set clear goals: Start by defining what you want to achieve with the transition. This includes your personal and professional goals, financial objectives and career aspirations.

  • Create a timeline: Outline the steps and deadlines for each phase of the transition. Begin planning early to give yourself ample time to address potential challenges and make informed decisions. When selling your practice, you should start the transition process early to allow for strategic positioning of your practice in a competitive environment to source attractive offers.
  • Track progress: Regularly review and adjust your plan as needed to stay on track. Keeping a close eye on your timeline ensures that you remain focused on your goals and can address any issues promptly.
  • Consult an expert: Engaging a dental practice broker can provide numerous benefits, such as enhanced negotiating capabilities, strategic positioning and navigating legal and financial complexities. Brokers can help craft advantageous deal structures and secure more competitive offers, ultimately maximizing the value of your practice transition.

Common Questions

What stresses do dentists face? Why is dentistry the most stressful job?

Dentists face a multitude of stressors that contribute to high levels of anxiety, burnout, and emotional health concerns. According to the ADA’s 2021 Dentist Health and Well-Being Survey, anxiety levels among dentists have more than tripled since 2003, with 16% of respondents reporting anxiety and 13% reporting depression (4). The COVID-19 pandemic has significantly exacerbated these issues, adding unique stressors related to safety, patient management, and operational challenges.

Dentistry is widely recognized as one of the most stressful professions due to factors such as patient anxiety, the demanding precision required, and the physical rigors of the work. The profession’s high standards for accuracy, coupled with the consequences of mistakes, alongside the long hours and physical strain, collectively intensify the stress experienced by dentists.

Why is emotional intelligence important in dentistry?

Emotional intelligence is important in dentistry because it builds patient rapport, enhances team collaboration and improves decision-making. Understanding and addressing patient needs and concerns helps create a positive patient experience. Promoting better communication and cooperation among staff leads to a more harmonious work environment. Additionally, emotional intelligence enables more empathetic and effective decision-making.

How do you make dentistry less stressful?

To make dentistry less stressful, practice self-care, seek support, delegate tasks and stay organized. To alleviate the stress of owning and managing a dental practice, especially without formal business training, many dentists find transitioning to a DSO to be a beneficial option. This transition allows dentists to refocus on clinical care by offloading managerial responsibilities such as marketing, payroll, human resources and recruiting to dedicated professionals within the DSO.

This shift is significant as it enables dentists to return to their passion for clinical work, spending more time chairside with patients.

Bottom Line

The dental industry is currently undergoing significant change, with approximately 35% of practices already consolidated. This ongoing consolidation adds urgency as practitioners must act soon to capitalize on the current opportunity before it’s too late. Delaying your decision could result in missed opportunities, reduced practice value and increased competition.

Begin planning your transition early, seek professional guidance, maintain open communication, and take care of your mental and emotional well-being. Acting promptly and decisively will not only maximize your financial returns but also provide peace of mind as you navigate this significant milestone in your career.

To ensure a smooth and successful transition that addresses both financial and emotional factors, contact the experts at Professional Transition Strategies.

References

  1. Nature, “Dentistry and the stress of practice,” https://www.nature.com/articles/sj.bdj.2019.18
  2. DrBicuspid.com, “4 key financial considerations when selling to a DSO,” https://www.drbicuspid.com/dental-business/practice-sales/article/15678019/4-key-financial-considerations-when-selling-to-a-dso 
  3. DrBicuspid.com, “Halfway Through the Dental Consolidation Wave: What Entrepreneurs Need to Know,” https://www.drbicuspid.com/dental-business/dso/article/15667122/halfway-through-the-dental-consolidation-wave-heres-what-entrepreneurs-need-to-know
  4. ADA, “Survey: Younger Dentists Report Higher Level of Stress, Emotional Health Concerns,” https://adanews.ada.org/new-dentist/2022/february/survey-younger-dentist-report-higher-level-of-stress-emotional-health-concerns/

July 10, 2024

More Reasons To Sell Your Dental Practice to a DSO

dentist working on a patient

Now more than ever, dental entrepreneurs are learning that dental service organizations (DSOs) have wrongfully received a bad reputation. Thanks to the industry-wide consolidation trend, the industry has gone from a buyer’s market to a seller’s market, further ensuring that DSOs are mutually beneficial for all parties. But in just five years, DSOs may no longer offer investment options like equity rolls and other lucrative opportunities currently available.

This shift underscores why dentists should seize the advantages of joining a DSO now. With over 375 DSOs to choose from, the time is ripe to explore the many benefits they offer. In this blog, we share even more reasons why selling your dental practice to a DSO is the best strategic move for your future.

Equity Arbitrage for Your Dental Practice

Equity arbitrage is a financial concept that was rarely utilized by dentists before private equity started investing in the space. In short, it all has to do with how valuable the equity is in your practice currently and how much your equity ends up being worth after the sale of your dental practice.

With DSOs, dentists receive a much higher financial result compared to selling to a private party, and the dentist can be a beneficiary of that arbitrage with less risk to the provider. This happens because dental practices have a steady cash flow and returning clientele, making them appealing to private equity investors since they can be very profitable. The best way to know the true value of your dental practice is to have it appraised to learn its enterprise value, which calculates earnings before interest, taxes, depreciation, and amortization (EBITDA), along with how many multiples that groups will consider offering.

The window for equity arbitrage is closing as the industry moves towards consolidation. Dentists, particularly younger entrepreneurs, are increasingly selling to DSOs to seize these opportunities before they diminish. Act now to avoid missing out on maximizing your practice’s value and potential recapitalization events in the next five years.

Higher Valuations When You Sell

It’s no secret fewer dental practices are selling to individuals than ever before, and there’s good reason why. With an increase in DSOs comes more competition available to dentists looking to sell. And since DSOs typically do not have to rely on bank financing because they are funded by private equity groups, they can pay more for practices than the standard individual thanks to private equity money, economies of scale, and cost structure optimization.

In individual sales, banks often assess practice values based on collections and seller’s discretionary earnings (SDE), which can restrict the maximum price individual buyers are willing to pay. In contrast, DSOs base their valuations on EBITDA, which considers the practice’s profitability and growth potential. This approach aligns more closely with the long-term financial strategies of DSOs supported by private equity.

In the end, not only will you receive a higher valuation for your dental practice, but you’ll also get a higher price point than if you were to sell to a single practitioner.

Partnership Options with DSO Models

When co-owners of a dental practice choose to part ways, there’s a lot that can be done ahead of time to make the transition easier for all those involved. This often happens when one dentist is looking to retire and the other wants to stay on to practice. Even in a partnership, everyone has different paths they want to explore, and joining a DSO helps to navigate the situation and ensure a smooth transition.

Flexible Financial Options

Before deciding to partner with a DSO, it’s important to explore other options that exist beyond selling 100% of the practice to a traditional DSO:

  • In the joint venture model, the dentist and DSO both invest capital in the form of money, equipment and other assets into the joint venture, sharing proportionally in the growth of the practice, while the dentist retains day-to-day clinical control of the practice. Additionally, participating dentists typically have the opportunity to share in the practice’s profits, aligning their financial incentives with the success of the venture.
  • When transitioning as a sub-DSO, the practice owner will exit the transaction debt-free with a large upfront payment and typically hold 40% ownership and profit share in the sub-DSO portfolio. Returns are made on various levels, including equity, profit sharing, and exit upon a parent DSO recapitalization.
  • With a traditional equity roll, the practice owner will sell 100% of their practice. They will then transfer their equity into the DSO as a whole to continue growing their investment. However, there are additional options available that don’t require selling the entire practice. For instance, in a joint venture (JV) model with an equity roll, you can choose to roll a portion of your equity or investment into the DSO. This allows dentists to maintain partial ownership of their practice while benefiting from the resources and support of the DSO.
  • 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. This is especially relevant with inflation top of mind.
  • With a 100% affiliation model, the practice owner sells their entire practice to a DSO, transferring full ownership and operational control to the DSO. This approach allows the dentist to exit completely from practice ownership after a transition period while benefiting from a lump-sum payment and, if preferred, maintaining involvement in patient care.
  • In a direct investment scenario, the investor (typically a private equity firm) purchases a stake in the dental practice, which means they become a shareholder or partner. This type of arrangement typically occurs with very large practices or groups of practices that already have robust infrastructure in place. The amount of ownership in the operating company varies per deal; this direct investment can be a buy-out with controlling interest transferring to the investor, or it can be a minority growth investment. The dentist, as the owner of the dental practice or group, continues to manage the clinical and operational aspects of the practice. The investor provides financial resources and strategic support to enhance the practice’s growth and operational efficiency while respecting the dentist’s expertise and role as the primary clinician and business leader.

Defined Exit Strategy for Selling

For many dental practitioners, the thought of retiring or transitioning out of practice can bring a significant amount of anxiety. They have concerns about legacy and the future of their practice as they enter the final stages of their careers.

If your exit plan involves selling your practice to another practitioner and then gradually phasing out, it’s important to be aware of potential pitfalls. Once ownership is transferred, you may lose agency in decision-making, which could harm your practice’s reputation and legacy. We’ve seen cases where new owners make sweeping changes that alienate staff and undermine the reputation the previous doctor worked hard to build.

Alternatively, forming a deal with a DSO such as a joint venture can be more beneficial. In such arrangements, the outgoing doctor remains involved in key decisions, maintaining stability within the practice. This model ensures that the practice continues to reflect the standards and values established over many years.

By partnering with a DSO, instead of waiting until retirement is imminent, dentists can develop an exit strategy well in advance. This proactive approach ensures a smoother transition and helps mitigate potential transition issues.

Better Health Care Through Practice Consolidation

It’s no secret the connection between oral health and overall health has become stronger over recent years. But the connection between DSOs and better medical and dental integration may not be as obvious. The reality is that DSOs are better equipped to handle “whole person” treatment and have the ability to partner with other medical professionals to play a part in treatment and prevention. These days, DSOs are leading the charge, which is why transitioning to one of the DSO models might be the right move for your dental practice.

Release Managerial Responsibilities to Focus on Dental Care

DSOs fit the dentist who craves a work-life balance and don’t want the added stress of the managerial responsibilities that come along with owning a business. Working 32 clinical hours (instead of six days a week with early mornings) is appealing to both the younger and older generation, especially leading up to retirement and to avoid burnout. For those looking to ease into retirement, working for a DSO can offer an abbreviated schedule rather than the added stress of a transition to another dentist. What’s more, you have the chance to expand and move toward a one-stop-shop model, all while increasing the value of your dental practice.

Retain Clinical Autonomy as Dentists

Gone are the days of having to hit quotas and report how many procedures have been performed. These days, dental entrepreneurs are looking for a true business partner rather than just someone to buy their practice. Modern DSOs are much more hands-off compared to their past reputation. With over 375 DSOs currently operating, sellers can find one that aligns with their clinical and cultural philosophies. This alignment ensures a smoother transition for both patients and staff, allowing dentists to maintain full clinical autonomy while benefiting from DSO support in operational and administrative areas.

Capitalize on the Consolidation Wave

The dental industry is currently halfway through its consolidation wave, only expected to continue for the next 5-7 years, driven by the significant advantages that DSOs offer both financially and operationally. This trend is transforming the landscape, making it an ideal time for dental practitioners to act now. By selling your practice to a DSO, you not only benefit from a higher valuation and reduced managerial responsibilities but also position your practice to thrive under a model that promotes better healthcare integration and operational efficiency.

As this wave continues, the competition among DSOs for quality practices will increase, but it won’t last forever. This means acting now can maximize your financial return and ensure a smooth transition for your practice. Embracing this trend can safeguard your legacy and provide a stable, profitable future for your practice.

Bottom Line for Dental Transitions

It’s easy to get wrapped up in the conundrum that still exists in the world of DSOs if you try to take the sale of your dental practice into your own hands.

Contact the experts at Professional Transition Strategies to ensure your dental practice transition goes smoothly while preserving the legacy you’ve worked so hard to build.

June 18, 2024

Is Now the Time to Sell Your Dental Practice? Insights from Kim McCleskey on The DrBicuspid.com Podcast

Professional Transition Strategies Consultant Kim McCleskey recently joined The DrBicuspid.com Podcast to discuss the current economic climate and its implications for dentists interested in selling their practices now or in the future. With 30 years of experience in the industry, McCleskey provided valuable insights into the evolving landscape of dental practice ownership. Here’s a summary of the podcast conversation.

 

Understanding the Current Economic Climate

McCleskey highlighted the current state of the dental industry, noting that it is approximately 35% consolidated, which is about halfway through the consolidation wave taking place. Consolidation is projected to reach the full 60-70% within the next 5-7 years, signifying a paradigm shift in the industry’s investment dynamics. With a growing number of practices falling under private-equity backed DSOs, the influx of investor capital will eventually slow. McCleskey emphasized the significance of this shift, as it will fundamentally alter the ownership landscape of dental practices.

Urgency in Decision-Making

With the impending wave of dental consolidation, there is a sense of urgency for dentists to consider their options. McCleskey discussed the pressure on dentists to sell now versus potentially waiting. Your options in the next three to four years following the peak of consolidation are going to decrease and change, she noted. She also stressed the importance of dentists understanding their options and making informed decisions to navigate this evolving landscape effectively.

Treating Dental Practices as Businesses

McCleskey underscored the importance of treating dental practices as businesses and understanding their profitability and value. The first step down this path is to get dialed into conversations about profitability. Working with experts like PTS to create a prospectus can help you understand your business and options, whether you’re selling to an individual or a DSO. This business-oriented approach ensures dentists make informed decisions that enhance the financial health and marketability of their practice.

Preparing Your Practice for Sale

The dental industry consolidation wave is nearing its peak, with only one to two rounds of recapitalization events likely remaining. Translated for your practice: This is a limited-time opportunity to maximize your wealth through a sale. For instance, for a practice valued at $2 million with $500,000 EBITDA (earnings before interest, taxes, depreciation and amortization), it can be a difference between selling for $2.75 million vs. $3.25 million for the same deal with two recapitalization events. Don’t miss out on the chance to capitalize on a strong seller’s market.

In preparation to sell, it’s imperative to build the profitability of your practice and its infrastructure now. McClesky advises that if you want to use your practice as an investment vehicle, now is the time to make sure your practice has the kind of value that will help with your personal and professional goals. She advises that it’s never too early to have an understanding of where your business is and to have a valuation done to understand what you can do differently to move the needle in your favor for when it comes time to sell.

Exploring Alternative Options

Selling to a DSO is a great option for many dentists, especially for those with practices that aren’t currently profitable and are considering retirement. Instead of closing up shop and walking away with nothing, DSOs offer an alternative that can help improve profitability and secure a better outcome for your practice.

McCleskey emphasized the importance of understanding the range of deal options DSOs provide. DSOs provide various deal structures tailored to meet different needs and goals. These include outright sales, equity rollovers, joint ventures, 100% buyouts and hybrid options. Each type of deal offers unique benefits, such as maintaining some level of ownership, receiving ongoing income or benefiting from the DSO’s resources and support to enhance practice profitability.

DSOs can help transform an unprofitable practice into a more valuable asset, offering a practical and profitable exit strategy for dentists close or ready to retire. By leveraging these options, dentists can find a deal structure that aligns with their personal and professional objectives.

What’s Next?

McCleskey’s insights shed light on the current economic climate of the dental industry and its implications for dentists. With the industry poised for significant consolidation in the coming years, dentists must understand their options and make strategic decisions now to secure their future success. 

Listen to the recent episode of The DrBicuspid.com Podcast featuring McCleskey to gain insights on the pressing market dynamics and understand if now is the right time to consider selling.

Contact the experts at Professional Transition Strategies for guidance on practice valuations, profitability consulting, and exploring the best transition options for your unique goals.

June 14, 2024

Navigating Dental Practice Transitions: Insights from Kim McCleskey on The DrBicuspid.com Podcast

Professional Transition Strategies Consultant Kim McCleskey recently joined The DrBicuspid.com Podcast to discuss the current economic climate and its implications for dentists interested in selling their practices now or in the future. With 30 years of experience in the industry, McCleskey provided valuable insights into the evolving landscape of dental practice ownership. Here’s a summary of the podcast conversation.

 

Understanding the Current Economic Climate

McCleskey highlighted the current state of the dental industry, noting that it is approximately 35% consolidated, which is about halfway through the consolidation wave taking place. Consolidation is projected to reach the full 60-70% within the next 5-7 years, signifying a paradigm shift in the industry’s investment dynamics. With a growing number of practices falling under private-equity backed DSOs, the influx of investor capital will eventually slow. McCleskey emphasized the significance of this shift, as it will fundamentally alter the ownership landscape of dental practices.

Urgency in Decision-Making

With the impending wave of dental consolidation, there is a sense of urgency for dentists to consider their options. McCleskey discussed the pressure on dentists to sell now versus potentially waiting. Your options in the next three to four years following the peak of consolidation are going to decrease and change, she noted. She also stressed the importance of dentists understanding their options and making informed decisions to navigate this evolving landscape effectively.

Treating Dental Practices as Businesses

McCleskey underscored the importance of treating dental practices as businesses and understanding their profitability and value. The first step down this path is to get dialed into conversations about profitability. Working with experts like PTS to create a prospectus can help you understand your business and options, whether you’re selling to an individual or a DSO. This business-oriented approach ensures dentists make informed decisions that enhance the financial health and marketability of their practice.

Preparing Your Practice for Sale

The dental industry consolidation wave is nearing its peak, with only one to two rounds of recapitalization events likely remaining. Translated for your practice: This is a limited-time opportunity to maximize your wealth through a sale. For instance, for a practice valued at $2 million with $500,000 EBITDA (earnings before interest, taxes, depreciation and amortization), it can be a difference between selling for $2.75 million vs. $3.25 million for the same deal with two recapitalization events. Don’t miss out on the chance to capitalize on a strong seller’s market.

In preparation to sell, it’s imperative to build the profitability of your practice and its infrastructure now. McClesky advises that if you want to use your practice as an investment vehicle, now is the time to make sure your practice has the kind of value that will help with your personal and professional goals. She advises that it’s never too early to have an understanding of where your business is and to have a valuation done to understand what you can do differently to move the needle in your favor for when it comes time to sell.

Exploring Alternative Options

Selling to a DSO is a great option for many dentists, especially for those with practices that aren’t currently profitable and are considering retirement. Instead of closing up shop and walking away with nothing, DSOs offer an alternative that can help improve profitability and secure a better outcome for your practice.

McCleskey emphasized the importance of understanding the range of deal options DSOs provide. DSOs provide various deal structures tailored to meet different needs and goals. These include outright sales, equity rollovers, joint ventures, 100% buyouts and hybrid options. Each type of deal offers unique benefits, such as maintaining some level of ownership, receiving ongoing income or benefiting from the DSO’s resources and support to enhance practice profitability.

DSOs can help transform an unprofitable practice into a more valuable asset, offering a practical and profitable exit strategy for dentists close or ready to retire. By leveraging these options, dentists can find a deal structure that aligns with their personal and professional objectives.

What’s Next?

McCleskey’s insights shed light on the current economic climate of the dental industry and its implications for dentists. With the industry poised for significant consolidation in the coming years, dentists must understand their options and make strategic decisions now to secure their future success. 

Listen to the recent episode of The DrBicuspid.com Podcast featuring McCleskey to gain insights on the pressing market dynamics and understand if now is the right time to consider selling.

Contact the experts at Professional Transition Strategies for guidance on practice valuations, profitability consulting, and exploring the best transition options for your unique goals.

May 29, 2024

Why Dental Entrepreneurs Need to Act Now: Insights from Becker’s Webinar with PTS Founder Kyle Francis and Lead Broker Stanton Kensinger

Professional Transition Strategies Consultant Kim McCleskey recently joined The DrBicuspid.com Podcast to discuss the current economic climate and its implications for dentists interested in selling their practices now or in the future. With 30 years of experience in the industry, McCleskey provided valuable insights into the evolving landscape of dental practice ownership. Here’s a summary of the podcast conversation.

 

Understanding the Current Economic Climate

McCleskey highlighted the current state of the dental industry, noting that it is approximately 35% consolidated, which is about halfway through the consolidation wave taking place. Consolidation is projected to reach the full 60-70% within the next 5-7 years, signifying a paradigm shift in the industry’s investment dynamics. With a growing number of practices falling under private-equity backed DSOs, the influx of investor capital will eventually slow. McCleskey emphasized the significance of this shift, as it will fundamentally alter the ownership landscape of dental practices.

Urgency in Decision-Making

With the impending wave of dental consolidation, there is a sense of urgency for dentists to consider their options. McCleskey discussed the pressure on dentists to sell now versus potentially waiting. Your options in the next three to four years following the peak of consolidation are going to decrease and change, she noted. She also stressed the importance of dentists understanding their options and making informed decisions to navigate this evolving landscape effectively.

Treating Dental Practices as Businesses

McCleskey underscored the importance of treating dental practices as businesses and understanding their profitability and value. The first step down this path is to get dialed into conversations about profitability. Working with experts like PTS to create a prospectus can help you understand your business and options, whether you’re selling to an individual or a DSO. This business-oriented approach ensures dentists make informed decisions that enhance the financial health and marketability of their practice.

Preparing Your Practice for Sale

The dental industry consolidation wave is nearing its peak, with only one to two rounds of recapitalization events likely remaining. Translated for your practice: This is a limited-time opportunity to maximize your wealth through a sale. For instance, for a practice valued at $2 million with $500,000 EBITDA (earnings before interest, taxes, depreciation and amortization), it can be a difference between selling for $2.75 million vs. $3.25 million for the same deal with two recapitalization events. Don’t miss out on the chance to capitalize on a strong seller’s market.

In preparation to sell, it’s imperative to build the profitability of your practice and its infrastructure now. McClesky advises that if you want to use your practice as an investment vehicle, now is the time to make sure your practice has the kind of value that will help with your personal and professional goals. She advises that it’s never too early to have an understanding of where your business is and to have a valuation done to understand what you can do differently to move the needle in your favor for when it comes time to sell.

Exploring Alternative Options

Selling to a DSO is a great option for many dentists, especially for those with practices that aren’t currently profitable and are considering retirement. Instead of closing up shop and walking away with nothing, DSOs offer an alternative that can help improve profitability and secure a better outcome for your practice.

McCleskey emphasized the importance of understanding the range of deal options DSOs provide. DSOs provide various deal structures tailored to meet different needs and goals. These include outright sales, equity rollovers, joint ventures, 100% buyouts and hybrid options. Each type of deal offers unique benefits, such as maintaining some level of ownership, receiving ongoing income or benefiting from the DSO’s resources and support to enhance practice profitability.

DSOs can help transform an unprofitable practice into a more valuable asset, offering a practical and profitable exit strategy for dentists close or ready to retire. By leveraging these options, dentists can find a deal structure that aligns with their personal and professional objectives.

What’s Next?

McCleskey’s insights shed light on the current economic climate of the dental industry and its implications for dentists. With the industry poised for significant consolidation in the coming years, dentists must understand their options and make strategic decisions now to secure their future success. 

Listen to the recent episode of The DrBicuspid.com Podcast featuring McCleskey to gain insights on the pressing market dynamics and understand if now is the right time to consider selling.

Contact the experts at Professional Transition Strategies for guidance on practice valuations, profitability consulting, and exploring the best transition options for your unique goals.

May 6, 2024

How Partnering with a DSO Can Help Preserve Your Dental Practice’s Legacy

Professional Transition Strategies Consultant Kim McCleskey recently joined The DrBicuspid.com Podcast to discuss the current economic climate and its implications for dentists interested in selling their practices now or in the future. With 30 years of experience in the industry, McCleskey provided valuable insights into the evolving landscape of dental practice ownership. Here’s a summary of the podcast conversation.

 

Understanding the Current Economic Climate

McCleskey highlighted the current state of the dental industry, noting that it is approximately 35% consolidated, which is about halfway through the consolidation wave taking place. Consolidation is projected to reach the full 60-70% within the next 5-7 years, signifying a paradigm shift in the industry’s investment dynamics. With a growing number of practices falling under private-equity backed DSOs, the influx of investor capital will eventually slow. McCleskey emphasized the significance of this shift, as it will fundamentally alter the ownership landscape of dental practices.

Urgency in Decision-Making

With the impending wave of dental consolidation, there is a sense of urgency for dentists to consider their options. McCleskey discussed the pressure on dentists to sell now versus potentially waiting. Your options in the next three to four years following the peak of consolidation are going to decrease and change, she noted. She also stressed the importance of dentists understanding their options and making informed decisions to navigate this evolving landscape effectively.

Treating Dental Practices as Businesses

McCleskey underscored the importance of treating dental practices as businesses and understanding their profitability and value. The first step down this path is to get dialed into conversations about profitability. Working with experts like PTS to create a prospectus can help you understand your business and options, whether you’re selling to an individual or a DSO. This business-oriented approach ensures dentists make informed decisions that enhance the financial health and marketability of their practice.

Preparing Your Practice for Sale

The dental industry consolidation wave is nearing its peak, with only one to two rounds of recapitalization events likely remaining. Translated for your practice: This is a limited-time opportunity to maximize your wealth through a sale. For instance, for a practice valued at $2 million with $500,000 EBITDA (earnings before interest, taxes, depreciation and amortization), it can be a difference between selling for $2.75 million vs. $3.25 million for the same deal with two recapitalization events. Don’t miss out on the chance to capitalize on a strong seller’s market.

In preparation to sell, it’s imperative to build the profitability of your practice and its infrastructure now. McClesky advises that if you want to use your practice as an investment vehicle, now is the time to make sure your practice has the kind of value that will help with your personal and professional goals. She advises that it’s never too early to have an understanding of where your business is and to have a valuation done to understand what you can do differently to move the needle in your favor for when it comes time to sell.

Exploring Alternative Options

Selling to a DSO is a great option for many dentists, especially for those with practices that aren’t currently profitable and are considering retirement. Instead of closing up shop and walking away with nothing, DSOs offer an alternative that can help improve profitability and secure a better outcome for your practice.

McCleskey emphasized the importance of understanding the range of deal options DSOs provide. DSOs provide various deal structures tailored to meet different needs and goals. These include outright sales, equity rollovers, joint ventures, 100% buyouts and hybrid options. Each type of deal offers unique benefits, such as maintaining some level of ownership, receiving ongoing income or benefiting from the DSO’s resources and support to enhance practice profitability.

DSOs can help transform an unprofitable practice into a more valuable asset, offering a practical and profitable exit strategy for dentists close or ready to retire. By leveraging these options, dentists can find a deal structure that aligns with their personal and professional objectives.

What’s Next?

McCleskey’s insights shed light on the current economic climate of the dental industry and its implications for dentists. With the industry poised for significant consolidation in the coming years, dentists must understand their options and make strategic decisions now to secure their future success. 

Listen to the recent episode of The DrBicuspid.com Podcast featuring McCleskey to gain insights on the pressing market dynamics and understand if now is the right time to consider selling.

Contact the experts at Professional Transition Strategies for guidance on practice valuations, profitability consulting, and exploring the best transition options for your unique goals.

April 26, 2024

What Sets PTS Apart?

Professional Transition Strategies Consultant Kim McCleskey recently joined The DrBicuspid.com Podcast to discuss the current economic climate and its implications for dentists interested in selling their practices now or in the future. With 30 years of experience in the industry, McCleskey provided valuable insights into the evolving landscape of dental practice ownership. Here’s a summary of the podcast conversation.

 

Understanding the Current Economic Climate

McCleskey highlighted the current state of the dental industry, noting that it is approximately 35% consolidated, which is about halfway through the consolidation wave taking place. Consolidation is projected to reach the full 60-70% within the next 5-7 years, signifying a paradigm shift in the industry’s investment dynamics. With a growing number of practices falling under private-equity backed DSOs, the influx of investor capital will eventually slow. McCleskey emphasized the significance of this shift, as it will fundamentally alter the ownership landscape of dental practices.

Urgency in Decision-Making

With the impending wave of dental consolidation, there is a sense of urgency for dentists to consider their options. McCleskey discussed the pressure on dentists to sell now versus potentially waiting. Your options in the next three to four years following the peak of consolidation are going to decrease and change, she noted. She also stressed the importance of dentists understanding their options and making informed decisions to navigate this evolving landscape effectively.

Treating Dental Practices as Businesses

McCleskey underscored the importance of treating dental practices as businesses and understanding their profitability and value. The first step down this path is to get dialed into conversations about profitability. Working with experts like PTS to create a prospectus can help you understand your business and options, whether you’re selling to an individual or a DSO. This business-oriented approach ensures dentists make informed decisions that enhance the financial health and marketability of their practice.

Preparing Your Practice for Sale

The dental industry consolidation wave is nearing its peak, with only one to two rounds of recapitalization events likely remaining. Translated for your practice: This is a limited-time opportunity to maximize your wealth through a sale. For instance, for a practice valued at $2 million with $500,000 EBITDA (earnings before interest, taxes, depreciation and amortization), it can be a difference between selling for $2.75 million vs. $3.25 million for the same deal with two recapitalization events. Don’t miss out on the chance to capitalize on a strong seller’s market.

In preparation to sell, it’s imperative to build the profitability of your practice and its infrastructure now. McClesky advises that if you want to use your practice as an investment vehicle, now is the time to make sure your practice has the kind of value that will help with your personal and professional goals. She advises that it’s never too early to have an understanding of where your business is and to have a valuation done to understand what you can do differently to move the needle in your favor for when it comes time to sell.

Exploring Alternative Options

Selling to a DSO is a great option for many dentists, especially for those with practices that aren’t currently profitable and are considering retirement. Instead of closing up shop and walking away with nothing, DSOs offer an alternative that can help improve profitability and secure a better outcome for your practice.

McCleskey emphasized the importance of understanding the range of deal options DSOs provide. DSOs provide various deal structures tailored to meet different needs and goals. These include outright sales, equity rollovers, joint ventures, 100% buyouts and hybrid options. Each type of deal offers unique benefits, such as maintaining some level of ownership, receiving ongoing income or benefiting from the DSO’s resources and support to enhance practice profitability.

DSOs can help transform an unprofitable practice into a more valuable asset, offering a practical and profitable exit strategy for dentists close or ready to retire. By leveraging these options, dentists can find a deal structure that aligns with their personal and professional objectives.

What’s Next?

McCleskey’s insights shed light on the current economic climate of the dental industry and its implications for dentists. With the industry poised for significant consolidation in the coming years, dentists must understand their options and make strategic decisions now to secure their future success. 

Listen to the recent episode of The DrBicuspid.com Podcast featuring McCleskey to gain insights on the pressing market dynamics and understand if now is the right time to consider selling.

Contact the experts at Professional Transition Strategies for guidance on practice valuations, profitability consulting, and exploring the best transition options for your unique goals.

April 4, 2024

The Ultimate Guide to Practice Transitions

Professional Transition Strategies Consultant Kim McCleskey recently joined The DrBicuspid.com Podcast to discuss the current economic climate and its implications for dentists interested in selling their practices now or in the future. With 30 years of experience in the industry, McCleskey provided valuable insights into the evolving landscape of dental practice ownership. Here’s a summary of the podcast conversation.

 

Understanding the Current Economic Climate

McCleskey highlighted the current state of the dental industry, noting that it is approximately 35% consolidated, which is about halfway through the consolidation wave taking place. Consolidation is projected to reach the full 60-70% within the next 5-7 years, signifying a paradigm shift in the industry’s investment dynamics. With a growing number of practices falling under private-equity backed DSOs, the influx of investor capital will eventually slow. McCleskey emphasized the significance of this shift, as it will fundamentally alter the ownership landscape of dental practices.

Urgency in Decision-Making

With the impending wave of dental consolidation, there is a sense of urgency for dentists to consider their options. McCleskey discussed the pressure on dentists to sell now versus potentially waiting. Your options in the next three to four years following the peak of consolidation are going to decrease and change, she noted. She also stressed the importance of dentists understanding their options and making informed decisions to navigate this evolving landscape effectively.

Treating Dental Practices as Businesses

McCleskey underscored the importance of treating dental practices as businesses and understanding their profitability and value. The first step down this path is to get dialed into conversations about profitability. Working with experts like PTS to create a prospectus can help you understand your business and options, whether you’re selling to an individual or a DSO. This business-oriented approach ensures dentists make informed decisions that enhance the financial health and marketability of their practice.

Preparing Your Practice for Sale

The dental industry consolidation wave is nearing its peak, with only one to two rounds of recapitalization events likely remaining. Translated for your practice: This is a limited-time opportunity to maximize your wealth through a sale. For instance, for a practice valued at $2 million with $500,000 EBITDA (earnings before interest, taxes, depreciation and amortization), it can be a difference between selling for $2.75 million vs. $3.25 million for the same deal with two recapitalization events. Don’t miss out on the chance to capitalize on a strong seller’s market.

In preparation to sell, it’s imperative to build the profitability of your practice and its infrastructure now. McClesky advises that if you want to use your practice as an investment vehicle, now is the time to make sure your practice has the kind of value that will help with your personal and professional goals. She advises that it’s never too early to have an understanding of where your business is and to have a valuation done to understand what you can do differently to move the needle in your favor for when it comes time to sell.

Exploring Alternative Options

Selling to a DSO is a great option for many dentists, especially for those with practices that aren’t currently profitable and are considering retirement. Instead of closing up shop and walking away with nothing, DSOs offer an alternative that can help improve profitability and secure a better outcome for your practice.

McCleskey emphasized the importance of understanding the range of deal options DSOs provide. DSOs provide various deal structures tailored to meet different needs and goals. These include outright sales, equity rollovers, joint ventures, 100% buyouts and hybrid options. Each type of deal offers unique benefits, such as maintaining some level of ownership, receiving ongoing income or benefiting from the DSO’s resources and support to enhance practice profitability.

DSOs can help transform an unprofitable practice into a more valuable asset, offering a practical and profitable exit strategy for dentists close or ready to retire. By leveraging these options, dentists can find a deal structure that aligns with their personal and professional objectives.

What’s Next?

McCleskey’s insights shed light on the current economic climate of the dental industry and its implications for dentists. With the industry poised for significant consolidation in the coming years, dentists must understand their options and make strategic decisions now to secure their future success. 

Listen to the recent episode of The DrBicuspid.com Podcast featuring McCleskey to gain insights on the pressing market dynamics and understand if now is the right time to consider selling.

Contact the experts at Professional Transition Strategies for guidance on practice valuations, profitability consulting, and exploring the best transition options for your unique goals.

February 28, 2023

What It’s Like to Work With a Dental Practice Broker

dentist with hands folded and looking at the floor

Transitioning a dental practice, whether you’re selling or merging, is a significant milestone in any dentist’s career. This journey, while full of opportunities, is also full of emotional challenges. Understanding and addressing these often overlooked emotional aspects is key to a smooth and successful transition. This article explores the various emotional facets of transitioning your dental practice and provides strategies to manage them effectively.

Coping With the Stress of Selling or Merging

The process of selling or merging a dental practice can be overwhelming. It involves many decisions, from financial considerations to logistical details. And, it isn’t just a professional change; it’s a significant life event that can impact your mental health. On top of that, dentistry is already a stressful job, with more than half of dentists experiencing high job stress according to a study from Nature (1). Recognizing this and taking proactive steps to manage your emotional well-being is essential for a successful transition.

Identifying Common Stressors

  • Uncertainty: The unknowns associated with the transition can create anxiety about the future direction of the practice and personal career path.
  • Workload: Balancing current practice demands while planning for the transition can lead to burnout. Selling a practice typically requires about 150 hours, spreading dentists thin between clinical care, business management and transition planning.
  • Financial Pressure: Large investments or holding a significant amount of debt can be scary and overwhelming. When investing in a dental practice, enlist experts to provide critical support, such as knowledge of medical or dental competition, patient demographics and expertise in practice appraisals to determine fair market value. For potential sellers, partnering with a dental service organization (DSO) often includes “cash at close,” providing immediate financial relief to clear debts and enhance financial stability for future endeavors.
  • Concerns With Exiting a Partnership: Transitioning out of a dental practice partnership is often complex, especially when one partner plans to retire while the other intends to continue practicing. This scenario often leads to divergent paths and requires careful planning to ensure a smooth transition for both parties. DSOs can offer structured solutions and support in navigating these transitions, facilitating agreements that accommodate different career aspirations and personal goals.
  • Worries About Clinical Autonomy in a DSO Transition: Modern DSOs offer varying levels of involvement, so finding one with your clinical and cultural values is crucial to preserving professional independence and patient care standards. To find the best fit, evaluate their support infrastructure and commitment to clinical autonomy. With over 375 DSOs available, an experienced broker can help identify those that align with your values and avoid those that might impose unwelcome changes.
  • Navigating Industry Shifts: The dental industry is currently undergoing significant consolidation, with approximately 35% of practices already consolidated (3) into DSO groups. This ongoing consolidation adds stress as practitioners must act soon amidst changing market dynamics to capitalize on the current opportunity before it’s too late.
  • Choosing the Best Option: It’s stressful when weighing multiple options before deciding on the best path forward for both personal and professional goals. When considering options for transitioning your practice, especially as a potential seller, it’s essential to weigh various deal structures available with DSOs, which include options such as an equity roll, joint venture model or outright sale to a DSO. Each structure offers different benefits and considerations, such as the financial incentives discussed in DrBicuspid.com (2), operational autonomy and future growth potential.

Strategies for Managing Stress

  • Plan Ahead: Create a detailed transition plan to minimize last-minute surprises. We always recommend starting the planning process at least five years before you want to transition your practice.
  • Delegate Tasks: Delegate responsibilities to trusted staff or consider hiring temporary assistance for help running the business during peak workload periods. Clearing non-essential tasks from your plate allows you to focus more on patient care and strategic planning.
  • Prepare To Sell: Effectively prepare by conducting a practice appraisal, which identifies opportunities to maximize profitability and enhance your practice’s overall value before listing it for sale. By optimizing financial and operational efficiency, you not only enhance your practice’s appeal but also navigate the selling process with greater confidence and reduced stress.
  • Seek Professional Help: Engaging with expert brokers like Professional Transition Strategies provides strategic guidance tailored to your goals and can support you in navigating negotiations, ensuring financial transparency and devising long-term growth strategies. This personalized counsel empowers dental entrepreneurs to make informed decisions that align with their personal vision for practice ownership, alleviating stress by knowing they have the best expertise guiding them every step of the way.

Managing Staff Emotions During Transitions

Your staff plays a critical role in your practice, and their emotions and reactions during a transition can significantly impact the process. It’s essential to avoid prematurely notifying staff about potential changes before the sale is finalized. Doing so could lead to significant disruptions and uncertainties among the team. Here’s how to approach communication effectively once the sale is complete:

Transparent Communication With Staff

  • Timing of Communication: Wait until the sale is complete before informing your staff about any impending transitions or changes. Premature communication can create unnecessary anxiety and speculation. Once the sale is finalized, it becomes appropriate to inform your staff about the upcoming changes to help mitigate uncertainties and alleviate fears.
  • Keep Them Informed: Regular updates about the transition can help alleviate fears and uncertainties. Clearly explain the steps involved in the transition and what it means for the staff.
  • Highlight Benefits: Discuss the potential benefits that come with the transition, whether it’s new career growth opportunities, enhanced benefits or improved working conditions.
  • Showcase Improvements: Inform staff about any improvements that will come with the transition, such as new technology, better facilities or expanded services.
  • Provide Support: Offer resources and support to help staff cope with the changes. This might include workshops or one-on-one meetings to address individual concerns.

Staff Benefits from DSO Transitions

Transitioning to a DSO can provide your staff with numerous benefits that enhance their professional and personal lives. DSOs are structured to offer comprehensive benefits, including health care and a 401K plan, from the outset. For hygienists and other dental professionals, DSOs present a well-defined career path with clear job opportunities. This structured approach allows staff to understand and plan their potential career progression. Moreover, DSOs invest in the latest technology, which not only improves the clinical experience for staff but also keeps them engaged and motivated. Overall, DSOs provide a supportive and structured environment that can greatly enhance job satisfaction and career growth for dental practice employees.

Dealing With Uncertainty

Change, even when positive, can trigger feelings of uncertainty and fear. Recognizing and addressing these emotions is essential for a smooth transition.

Coping Mechanisms

  • Acknowledge Your Feelings: Accepting and understanding your emotions can help you manage them better.
  • Stay Positive: Focus on the benefits and opportunities that the transition will bring.
  • Seek Support: Talk to colleagues, friends or a trained professional to help process your feelings. Connecting with other dentists who have undergone a similar practice transition can provide valuable insights and alleviate fears, or help identify DSO groups that may be a good fit if you’re considering selling your practice. Understanding their experiences with different DSOs can guide your decision-making process and ease concerns about the transition. Additionally, partnering with a seasoned dental practice broker can assist in identifying your ideal buyer, easing any worries you might have.

Balancing Personal and Professional Life

A transition can disrupt the delicate balance between your personal and professional life. It’s important to find ways to maintain this balance to ensure overall well-being.

Ensuring Self-Care During the Transition

  • Set Boundaries: Allocate specific times for work and personal activities.
  • Trust Your Team: Entrust responsibilities to your team to avoid overburdening yourself.
  • Take Breaks: Regular breaks and time off can help prevent burnout.

Financial Considerations and Emotional Well-Being

Financial aspects of a transition can significantly impact your emotional well-being. Proper financial planning and management can alleviate stress and ensure a smoother transition. These steps ensure that financial considerations are carefully managed throughout the transition process, providing financial stability and peace of mind.

Financial Planning Tips

  • Merging Dental Practices: When merging practices, it’s crucial to budget for integration costs, potential redundancies and any legal or regulatory expenses involved. An experienced dental broker can help navigate the complexities of combining financial systems and aligning revenue streams to ensure a seamless transition.
  • Selling a Dental Practice: Planning for a successful sale involves conducting a thorough practice appraisal to determine its fair market value and identifying and vetting potential buyers – both groups and individuals. Seeking guidance from an expert broker can streamline negotiations and maximize financial benefits from the sale.

Creating a Transition Timeline and Checklist

DSOs fit the dentist who craves a work-life balance and don’t want the added stress of the managerial responsibilities that come along with owning a business. Working 32 clinical hours (instead of six days a week with early mornings) is appealing to both the younger and older generation, especially leading up to retirement and to avoid burnout. For those looking to ease into retirement, working for a DSO can offer an abbreviated schedule rather than the added stress of a transition to another dentist. What’s more, you have the chance to expand and move toward a one-stop-shop model, all while increasing the value of your dental practice.

Developing a Transition Plan

  – Set clear goals: Start by defining what you want to achieve with the transition. This includes your personal and professional goals, financial objectives and career aspirations.

  • Create a timeline: Outline the steps and deadlines for each phase of the transition. Begin planning early to give yourself ample time to address potential challenges and make informed decisions. When selling your practice, you should start the transition process early to allow for strategic positioning of your practice in a competitive environment to source attractive offers.
  • Track progress: Regularly review and adjust your plan as needed to stay on track. Keeping a close eye on your timeline ensures that you remain focused on your goals and can address any issues promptly.
  • Consult an expert: Engaging a dental practice broker can provide numerous benefits, such as enhanced negotiating capabilities, strategic positioning and navigating legal and financial complexities. Brokers can help craft advantageous deal structures and secure more competitive offers, ultimately maximizing the value of your practice transition.

Common Questions

What stresses do dentists face? Why is dentistry the most stressful job?

Dentists face a multitude of stressors that contribute to high levels of anxiety, burnout, and emotional health concerns. According to the ADA’s 2021 Dentist Health and Well-Being Survey, anxiety levels among dentists have more than tripled since 2003, with 16% of respondents reporting anxiety and 13% reporting depression (4). The COVID-19 pandemic has significantly exacerbated these issues, adding unique stressors related to safety, patient management, and operational challenges.

Dentistry is widely recognized as one of the most stressful professions due to factors such as patient anxiety, the demanding precision required, and the physical rigors of the work. The profession’s high standards for accuracy, coupled with the consequences of mistakes, alongside the long hours and physical strain, collectively intensify the stress experienced by dentists.

Why is emotional intelligence important in dentistry?

Emotional intelligence is important in dentistry because it builds patient rapport, enhances team collaboration and improves decision-making. Understanding and addressing patient needs and concerns helps create a positive patient experience. Promoting better communication and cooperation among staff leads to a more harmonious work environment. Additionally, emotional intelligence enables more empathetic and effective decision-making.

How do you make dentistry less stressful?

To make dentistry less stressful, practice self-care, seek support, delegate tasks and stay organized. To alleviate the stress of owning and managing a dental practice, especially without formal business training, many dentists find transitioning to a DSO to be a beneficial option. This transition allows dentists to refocus on clinical care by offloading managerial responsibilities such as marketing, payroll, human resources and recruiting to dedicated professionals within the DSO.

This shift is significant as it enables dentists to return to their passion for clinical work, spending more time chairside with patients.

Bottom Line

The dental industry is currently undergoing significant change, with approximately 35% of practices already consolidated. This ongoing consolidation adds urgency as practitioners must act soon to capitalize on the current opportunity before it’s too late. Delaying your decision could result in missed opportunities, reduced practice value and increased competition.

Begin planning your transition early, seek professional guidance, maintain open communication, and take care of your mental and emotional well-being. Acting promptly and decisively will not only maximize your financial returns but also provide peace of mind as you navigate this significant milestone in your career.

To ensure a smooth and successful transition that addresses both financial and emotional factors, contact the experts at Professional Transition Strategies.

References

  1. Nature, “Dentistry and the stress of practice,” https://www.nature.com/articles/sj.bdj.2019.18
  2. DrBicuspid.com, “4 key financial considerations when selling to a DSO,” https://www.drbicuspid.com/dental-business/practice-sales/article/15678019/4-key-financial-considerations-when-selling-to-a-dso 
  3. DrBicuspid.com, “Halfway Through the Dental Consolidation Wave: What Entrepreneurs Need to Know,” https://www.drbicuspid.com/dental-business/dso/article/15667122/halfway-through-the-dental-consolidation-wave-heres-what-entrepreneurs-need-to-know
  4. ADA, “Survey: Younger Dentists Report Higher Level of Stress, Emotional Health Concerns,” https://adanews.ada.org/new-dentist/2022/february/survey-younger-dentist-report-higher-level-of-stress-emotional-health-concerns/