3 Things to Know about Retaining Associates in Your DSO

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Group dental practices are all the rage today and they are the fastest growing segment of the dental industry. There are many trials and tribulations to starting and growing any business. However, some are more critical than others are in the big picture of ongoing success. In a recent webinar for Solutionreach, Perrin Desportes, the co-founder and partner of TUSK, shared his insights on what he thinks are the most important aspects of growing your DSO.

One of the areas he spent the most time on was attracting and retaining key associates. The fact is that you should expect to have some churn from lower performers. But you can’t afford to lose your best performers. Your goal should be to recruit and retain the best talent with these three objectives in mind:

• Recruit top performers to begin with
• Get them to product extraordinary results
• Retain them for the long haul

Before you can do that, it’s helpful to understand why people leave. According to a recent Gallup study, the top three reasons employees leave are:

• They have “bad” managers
• They want to make more money
• They have no opportunities for growth

How can you address these issues and ensure your top performers stay with your DSO and that you can attract similarly talented and hardworking associates? You can provide a level of ownership.

Better Management

Until we all become CEO, we’re going to be reporting to somebody. Everyone can’t run things. However, having ownership in the business that we’re working to build gives us a sense of control of our future, a stake in the success, and a feeling that we’re actually “managing” ourselves.

Making More Money

Most people want to make more money. This can be especially true of those carrying large debt coming out of dental school. Having ownership in the business provides a portion of the distribution of the profits each year and a payout for our piece of the pie that we have grown over time if the company is ever sold.

Opportunities for Growth

“Growth” is a relative term in group practice dentistry as there is little hierarchical structure to most businesses. “Growth” can mean a greater opportunity to contribute to the directions of the business or a “seat at the table” so to speak. Ownership helps to achieve that.

How Do You Provide Ownership?

The number one answer to addressing the need for better management, making more money, and having a seat at the table is equity. This is the value proposition that says to your potential associations, “Here’s why you should pick us.”

Equity is ownership. Why does that matter? Because owners:

• Show up early and stay late
• Offer input to help create a better business
• Produce greater results
• Care about the business and every detail of it

Ask yourself if you would rather own 100 percent of $2,000,000 business or 80 percent of a $10,000,000 business. If the answer is the later then you are focused on building a growth business.
When you focus on growth and using equity and ownership to retain the best performers, you focus on building wealth in the long term. Recruiting and retaining top performers is what will take you from a $2,000,000 business to a $10,000,000 business (or whatever the numbers may be).

Options to Bring in Owners

If you’re building a growth business, then how do you want to bring in other owners? You’ll need them to help you grow and in return, they will be more invested (as we discussed earlier). There are different approaches to consider.

Option 1: You allow the associate to buy in at the practice or DSO level. Some key things to consider in this model are:

• Cross-collateralization: If they have to take out a loan to buy in, then the practice is leveraged for that loan if they default.
• Profit distribution: Profits would now be distributed to others owners besides yourself from the time they buy in.
• Restrictive covenants: Employment agreements, non-competes, etc. if that partial owner leaves or is terminated.

Option 2: You take dilution and allow them to earn equity. In this model, they build equity over time at no real cost to you or the associate. It works like this:

• Equity based on goals: You offer them equity based on production goals. If they meet those goals, they get an equity stake. If they don’t meet them then they don’t.
• No debt for the associate: They don’t have to write a check at the time. They earn the equity over time. Therefore, it’s an incentive-based system for them.
• Goals can increase: The business can grow because you can increase production goals each year.

In option two, you are the primary beneficiary of the model because it is designed to spur growth as part of the ownership. You and the associate have a shared interest in growing those production goals and the business.

Ultimately, growing your DSO means finding a way to successfully recruit and retain the best talent. Offering ownership is an ideal way to do that. In addition, approaching ownership through a dilution model where they earn equity based on performance has the greatest benefit to you.

If this article was helpful in thinking about how to grow your DSO,
register for Solutionreach’s next FREE webinar for DSOs:
The Financial Pros and Cons of the DSO Model.


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