If you own a dental practice and are considering transitioning the practice, it is imperative that you review all your options. The traditional path when selling your practice had been to bring on an associate and eventually sell your dental practice to that associate. Another traditional option was to use a dental practice broker and sell your practice to the highest bidder.
A growing trend, and a strategic option for many dental practice owners, is affiliating with a dental support organization or dental group practice.
Why sell your practice to a DSO?
- You get paid upfront for the equity in your practice.
- DSOs have the financing and there is no need to worry whether the buyer will get approved by the bank.
- Dental support organizations are paying premiums in many cases for the “right” practice, the “right” location and “right” dentist.
- DSOs can take your existing practice to the next level in terms of technology, marketing, employee retention. The DSOs can offer benefits not found at solo practitioners’ office.
- Should you choose to leave the practice, DSOs offer a variety of exit strategies. Should you choose to stay, there are a variety of long term career paths.
- DSO alleviate the pressures and burdens of the administrative functions.
- Leveraging the existing DSOs brand while marketing the practice increases the affiliate practice’s reach which stimulates practice growth.
What type of dentist owners are DSOs looking to partner with?
- Dental Support Organizations are looking for dentist owners that are willing to stay on for a certain amount of time (typically two years) after the affiliation process to transition the patients and staff.
- DSOs are also looking for dentists who realize they have grown their practices as much as they can on their own, and are looking for help taking their practices to the next level.
- Dentists who want career growth and a multitude of career options are excellent candidates.
- Dentist owners who want to stay on long term and practice dentistry, but don’t want the hassles of running the practice.
What type of dental practices are good candidates for a dental support organization to affiliate with?
There are no DSO industry standards for what practices qualify as DSO affiliate practices, however, there are some rules of thumb that you can use when evaluating transitioning your practice to a dental service organization.
The following is a list of ‘wants’, but not necessarily requirements, when DSOs evaluate practices they are looking to acquire:
- Practice location – preference is in a high traffic retail center, or in a stand alone building near highly trafficked routes that potential patients would have exposure to during their daily routines.
- Number of operatories – This number can vary greatly, but typically a DSO is looking at a minimum of three operatories with room to expand to accommodate increased hygiene and the addition of specialists. Ideally, a DSO would like to see 5-10 operatories. This number varies greatly from one DSO to another.
- Production / Revenue – Again this number varies greatly from one dental support organization to another, but in general, a DSO is looking at practices with a minimum of $600,000 in production. Larger DSOs typically won’t look at practices doing under $1,000,000 in production.
- Number of locations – DSOs ideally would like to affiliate or acquire small dental group practices. Five locations and up are prime candidates for affiliation and can provide high returns for small dental group owners looking to transition to a DSO. Single location practices are still very desirable, but that location would typically have to fit into an already established geographic region [see Geography below].
- Geography – This varies great from one dental support organization to another. If a DSO does not have a presence in your particular state or metro area of that state, then they are probably not interested in a single practice as an affiliate. What they might be interested in is a 5 – 10 practice dental group that can act as a base of operations in that particular geographic location. If a DSO does have affiliate practices in your metropolitan area, then your practice may be a good candidate as an affiliate.
Written by Beth Miller, GDN contributor.