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Professional Transition Strategies
Professional Transition Strategies
PTS wants to help you every step of the way. Whether you're selling, buying, leasing or expanding your dental clinic, PTS is here to provide the information, answers and expertise you need. Check back weekly for our most recent blog posts!
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Professional Transition Strategies
Professional Transition Strategies

Unlocking Your Practice's Hidden Potential: The Impact of PTS's Proprietary ROI Calculator

8/27/2024 9:18:12 AM   |   Comments: 0   |   Views: 42
Navigating the intricate financial landscape of dental practice transitions can be overwhelming for many dentists. With numerous variables affecting potential financial outcomes, it's easy to feel uncertain about making the right decisions. At Professional Transition Strategies (PTS), we recognized the need for a tool that could simplify this process and provide clear, accurate financial projections. Enter our proprietary ROI calculator—a revolutionary tool in dental practice valuations. In this blog, we explain what sets PTS’s ROI calculator apart and how it empowers practice owners to uncover their practice’s hidden financial potential.

Visualizing Your Financial Future with Precision
Imagine having a detailed financial projection for every buyer offer, giving you a comprehensive view of everything from immediate cash at close to long-term impacts like recapitalization events, tax implications and overall financial strategy. That’s exactly what PTS’s ROI calculator provides.

After conducting an initial valuation, we use this tool to help dentists visualize their potential financial outcomes for each offer. Whether you're burdened with significant debt or seeking immediate cash flow, our calculator offers precise projections to guide your decision-making process.

Why You Need This Tool
The creation of our ROI calculator was driven by the need to assist dental entrepreneurs in comparing various buyer offers and their financial outcomes. It also helps weigh the option of not pursuing any deal, offering a comparison with your practice’s projected growth rate. With so many factors to consider — deal structure, tenure, debt, real estate, opportunity costs — it was essential to develop a tool that could provide a thorough analysis.

Often, practice owners find themselves outgrowing their regular advisors, such as accountants and financial planners, who may not fully grasp the unique dynamics of the dental industry during the current consolidation wave. Our calculator shines a light on these complexities, offering precise projections and insights that traditional advisors might overlook.

Navigating the Consolidation Wave
The ongoing consolidation wave is reshaping the dental industry, with more practices being acquired by larger dental groups. Currently, around 35% of the industry is consolidated, and experts predict this could reach 60% to 70% within the next five years.

In this environment, your equity behaves differently. Holding onto equity in a single practice can be risky, similar to investing in a single stock. Partnering with a dental service organization (DSO) can provide dentists with opportunities for faster equity growth and reduced risk. Our ROI calculator illustrates how your equity can stabilize and grow when aligned with a larger group, highlighting the potential for significant financial security and growth.

Equity arbitrage, or optimizing the value of your practice’s equity during consolidation, is a critical factor to consider. DSOs, backed by private equity, can often provide higher offers due to their access to capital and diverse financial structures. The calculator clarifies how your equity can grow in this context, potentially surpassing what you might achieve through traditional practice enhancements alone.

Additionally, the tool shows how the power of time can significantly impact equity growth. The longer your equity participates in private equity, the greater its growth potential, often exceeding the average growth seen in public markets like the stock market.

Given the current state of the consolidation wave, it's crucial to start planning for a transition now to capitalize on these equity-growing opportunities before they diminish.

Benefits & Real-World Applications of the ROI Calculator
The ROI calculator helps you understand how partnering with a group could significantly enhance your practice’s financial performance. While it's tempting to believe that major updates or changes to your practice will lead to substantial growth, even a high-performing practice typically won't match the equity returns achievable during this consolidation wave. Our tool demonstrates how partnering with a group could potentially offer superior returns in this unique period.

Feedback from doctors who have used the calculator has been overwhelmingly positive, with many appreciating the detailed insights and clarity it provides.

What Makes Our Calculator Unique?
While other brokers and consultants may rely on generalities or rules of thumb when discussing deals with DSOs, our calculator offers a much more detailed and personalized analysis. For example, while a common rule of thumb suggests that private equity investments grow about 4x over a four-year cycle, this generalization doesn't account for the specific nuances of your situation.

Our calculator is far more robust, allowing for in-depth discussions and scenario modeling with our experts. It presents a side-by-side comparison of all available options, offering short-, medium-, and long-term projections that give a complete financial picture. It accounts for every detail, including the complexity of your equity structure — whether as a joint venture, holdco, or sub-DSO equity — as well as factors like taxes, practice management and existing debt.

One of the most unique aspects of the calculator is its flexibility regarding timing. It can project your equity’s performance based on where you are in the private equity cycle, whether you're just starting or already two years in. This allows you to plan for the future with precision, not just focusing on immediate cash at close but also understanding how each deal will impact your long-term financial future.

Variables Considered by the Calculator
Our ROI calculator takes into account a wide array of variables, including collections, EBITDA, SDE, tax implications (both state-specific and deal-structure specific), the doctor’s desired practice timeline, future compensation style, opportunity costs, synergies from partnerships, deal structure details (such as cash versus equity, earn-outs, holdbacks), private equity styles, real estate ownership and debt analysis. Each variable is meticulously analyzed to provide a comprehensive financial picture.

You don’t need to worry about managing all these factors yourself; the calculator does the heavy lifting. Our experts at PTS are here to guide you through the results, helping you understand how they align with your goals.

Final Thoughts
The PTS proprietary ROI calculator is more than just a financial tool — it's a resource designed to help dentists unlock the untapped potential of their practice. Its true value lies in its ability to compare different deals and outcomes, showing how each option aligns with your long-term goals. By visualizing the benefits of capitalizing on the consolidation wave before it’s too late, dentists can make well-informed decisions that secure their financial future.

Contact the experts at PTS to discover how our ROI calculator can help you unlock your practice’s full financial potential.
Category: Practice Transitions
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