You want to sell your dental practice but are not ready to retire. It’s all too common that some dentists love practicing but don’t necessarily like the managerial aspect of owning a business. Enter: dental service organizations. With the right tools in place, you can sell to a DSO and still practice at your original location. Here’s how to get in on the consolidation wave.
When to sell
Whether retiring or just looking to consolidate, the best time to sell any dental practice is at its peak value. Because each DSO has its own practice profile and requirements (including collections, number of ops, location and type of dentistry), affiliation isn’t always an option; however, you’ll get a higher valuation and be able to completely retire when the time comes. Specifically, DSOs can pay more than a single practitioner because they are funded by private equity groups, there is more variety of DSOs available from which to choose, and DSOs have the financial ability to compete in the bidding wars without set limits.
Why affiliate with a DSO
Affiliating with a DSO will give you more flexibility by releasing the office management and human resources of your practice. Selling to a DSO allows dentists to focus on the clinical side and patient care while professional office management handles the billing, staffing and all the other aspects that come along with owning a business. DSOs provide non-clinical functions on a continuum. Some do a little, such as financial backing or accounting services; some do a lot, such as supply and lab formularies. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks.
Valuation process
A well-laid plan can take up to five years so you don’t need to (and shouldn’t!) wait until you’re ready to sell to conduct a comprehensive practice appraisal to determine ways to make your practice more valuable and profitable. Appraising your dental practice before retirement is on the horizon will give you an idea of how much it’s worth and what you need to increase (production, collections or otherwise) to pay off your loan, if that’s the case. The factors that will impact the value of your dental practice include its location, growth potential, reason for the sale, and long-term trends of the practice’s revenue and profit margin.
Current state of DSOs
It’s true that fewer dental practices are selling to individuals than ever before. Dentists can now think creatively during the transition process. With an increase in DSOs comes more options available to dentists looking to sell. In turn, DSOs are coming equipped with the experience to run a successful practice.
Bottom line
DSOs have greater purchasing power and corporate structures, allowing them to pool and allocate key resources, such as staff, cash and personal protective equipment. Typically, a DSO’s valuation of a practice comes out higher than an individual’s. Not only will your practice value for more if selling to a DSO, but you also have the option to stay on and earn a salary for that inevitable retirement, unlike with a straight buy-out.