Thinking about selling to a DSO? Here are 3 things they don’t want you to know.
Considering selling to a DSO? Get your practice ready now.
Here at NextLevel Practice, we focus on helping you become three things:
- Time free
- Financially free
Using our proven practice model and expert business training (with tools like Abundents University), we work to help you build systems and processes into your practice that will strengthen your team, educate your patients, and even decentralize your role in the office to help you reduce stress, enjoy higher profits, and even enjoy your life outside of the office.
And while that may seem especially applicable to dentists who are in the middle of their career or are even just starting out, I’ve talked to plenty of dentists who are getting closer and closer to retirement and think that it’s too late to make a change now, or that they won’t see results quick enough.
That’s simply not true! If you’re 5-10 years away from retirement, there is no better time than now to get your practice ready for the next step. All the work you put in now will make a huge difference in your practice’s value and if you’ll be financially free once selling.
Why your endgame matters
Here’s the hard truth: only 4% of dentists retire financially free. That is, 4% of dentists sell their practice for enough money to cover their existing debt and give them enough to live on in retirement. The other 96%? They’re working harder and longer to make up the difference. In fact, the ADA has said that in the last 20 years, the average retirement age for dentists has risen from 62 to 69!
I’ve committed my life and career to helping dentists in every stage of their journey, which means that I am 100% devoted to helping heroes like you retire when you want, with the ability to support the lifestyle you want throughout your retirement.
So here’s my advice to you: know your options! If you’re in mid-career, work as hard as you can to reach your practice’s potential. And if you’re nearing the end of your career, work even harder to make the most of your practice and decide what end strategy works best for you.
Check out our webinar
Recently, I had the chance to sit down with Kyle Francis, the founder and president of Professional Transition Strategies. He’s a world-class financial whiz that has helped facilitate the sale of hundreds of dental practices. This is a guy who understands end strategy options.
We talked about one of the fastest-growing end strategy options out there today: consolidation. That is, selling your practice to a DSO. You can watch our entire conversation here, but here’s a quick recap:
A New Option
Selling your practice to a DSO is a fairly new option. As recently as 15 years ago, consolidation didn’t exist. The only place that dentists could leverage their asset (their practice) was through banks, selling portions of the practice (getting a partner), or selling outright to another person.
The idea of a Dental Service Organization has grown steadily since then, with private equity groups buying practices and consolidating them into larger organizations. Until 2020, DSOs grew to be about 20% of the market. But since the pandemic started in 2020, there’s been a huge uptick in dentists selling their practices to DSOs, consolidating another 10% of the market in just 2 years!
How it works
When a dentist sells their practice to a DSO, the group generally pays more for the practice that you could get for a sale to an individual, then keeps you on for 3-5 years, paying you from the profit, almost like a reverse mortgage. While there are some great DSOs out there, there are also some bad ones.
To help you make a wise choice, keep these three things in mind:
#1 DSOs don’t want you to know your full potential
Most practices aren’t reaching their full production potential with their case acceptance and patient retention. DSOs see a practice’s potential room for growth, and will buy practices where they see lots of potential for increased revenue…for a lower price.
If you want to make the most of your sale, you need to understand your full potential NOW and start working toward it so you can make your practice more attractive to potential buyers (DSOs or otherwise). If you need help seeing that potential, our launch program was designed specifically to help you do the numbers and make a plan to increase your growth and possibility.
#2 No matter what they promise, selling to a DSO will limit your autonomy
Up until now, you’ve had total control of your practice. This all changes when you join a DSO. Even if the group promises upfront to let you retain control, they will have a huge stake in the success of the practice and will step in to make changes when they see fit.
#3 Get ready for a loss in power
If you sell to an existing DSO, especially a large one, chances are they will already have systems and processes in place that you will be expected to implement in your practice. From marketing to new patients to choosing the products you use, the DSO will call the shots. Make sure you understand just what and how much power you will retain, and how much the DSO group will control.
Your unique situation
Kyle predicts this dental consolidation trend will continue over the next 10 years until 60-70% of the dental market has consolidated. This puts you in a unique section of history, with the opportunity to consolidate at a potentially huge benefit to you–if you do it right.
At NextLevel, we’re here for you! If you’ll be selling in the next 5-10 years, we’d love to help you make the most of your practice now and understand your options for the future. With experience helping more than 6,000 practices worldwide, we’ve found the exact places to look in your practice to find your earning potential, train your team, and even help you become the leader you were meant to be. Let’s talk about how we can help you! Just schedule a free consultation to talk to one of our expert coaches.