Should I Sell My Dental Practice to a DSO or a Private Buyer?

By Mark Soelberg, CVA, Vice President of Arizona Sales

In recent years, dental service organizations (DSOs) have become a hot topic in the U.S. dental market. Dentists are receiving more and more offers to sell their practices to these organizations, and this trend isn’t likely going away.

We put together the following information to help you determine if a private practice or DSO sale is right for you.

What is a DSO? Do DSOs differ from DPOs?

DSOs aim to relieve owner-doctors of the operational and managerial responsibilities of running a business (i.e. bookkeeping, benefits, payroll, staffing, marketing, supplies and repairs). Some participating dentists have found this model reduces their clinical autonomy, which often results in higher doctor turnover and reduced job satisfaction.

Dental partnership organizations (DPOs) were created to address some of the issues DSOs face. DPOs aim to give their partnering doctors more clinical autonomy and enable them to maintain more of the benefits associated with ownership.

DSO sales are becoming increasingly more common. The ADA estimates that 7.4 percent of all practicing U.S. dentists are affiliated with a DSO; among young dentists that number more than doubles.

What should I expect in a DSO sale?

The terms of a DSO sale will vary depending on the group, but generally speaking, here is what we are seeing in the marketplace:

Workback Period

DSOs typically require a 3-5 year workback period, though some groups may be more flexible in this requirement. Part of the reason DSOs generally pay more for practices is because they anticipate maintained goodwill as the partnering doctor continues to provide clinical care.

Sale Price

DSOs’ offers may seem more generous than what you would get from a private buyer. However, you should carefully evaluate the offer to fully understand the payment schedule and equity options. Generally, doctors walk away with 60-70 percent of the sale price at close with the remaining held back and paid at a future date.

Autonomy

Much of your decision-making power may be forfeited, depending on the group. The DSO may oversee all managerial and operational decisions, and some may even require certain working hours, production/collection goals, etc. Talk with other providers in the group to learn about their experiences before committing to the sale.

What should I expect in a private practice sale?

Despite the rise in DSOs, selling to a private buyer is still the most common type of practice sale on the market today. Here are some of the terms we often see:

Workback Period

In a private practice sale, the selling dentist has a much shorter workback period. The length of time depends on the preferences of both the seller and buyer, and can be as short as one day or up to six months. Selling dentists typically stay on long enough to help with the transition of patients and goodwill.

Sale Price

Today’s lending environment offers low rates for buyers with 100 percent financing in most cases, which enables sellers to collect all of their proceeds at close. There are no seller carry notes, holdbacks or equity pieces that have to be liquidated at some point down the road.

Which option should I choose?

The decision is ultimately up to you based on your personal preference.

Group practice may be right for you if:

• You still desire to practice dentistry clinically.
• You’re overwhelmed by the operational and management side of dentistry.
• You want to maximize your practice value.

Private practice may be right for you if:

• You are very near retirement.
• You prefer a quick, clean transition.
• You prefer to receive 100 percent of the proceeds at close.
• You want to be the sole decision-maker when choosing who to carry on your legacy at the practice.

Consult with an expert

The decision to sell your practice should not be taken lightly, as you only get one chance to make the right sale. An expert by your side can help you evaluate selling options, screen potential buyers and negotiate a successful sale on your behalf.

Menlo Dental Transitions has completed hundreds of practice sales and knows exactly what it takes to conduct a successful transition. Contact our team today to schedule a complimentary, confidential consultation to discuss your upcoming transition!