Pros and Cons of Selling Your Dental Practice to a DSO

Dental service organizations and similar corporate groups continue to increase their market share in the U.S. The decision to partner with a DSO may or may not be the right decision for you. To help you decide, we will outline the pros and cons of selling your dental practice to a DSO.

Pros of Selling Your Dental Practice to a DSO

DSO sales typically require a 3- to 6-year work back period, which works well for many dentists who plan to continue practicing dentistry. Some dentists dislike or are under-qualified to handle tasks such as bookkeeping, staffing and marketing. DSOs often take over the operational and managerial responsibilities of running a practice, enabling the dentist to focus primarily on providing patient care.

Dentists may also see higher valuations from corporate groups than from private buyers. General practices typically generate valuations of 75 to 90 percent of collections when sold to private buyers. We’ve seen DSOs price practices as high as 100 to 200 percent of revenue. Larger practices tend to see higher valuations.

Cons of Selling Your Dental Practice to a DSO

After years of being the sole decision maker, some dentists dislike changes in autonomy, which can vary greatly depending on the group you select. In addition, DSO sales have a longer transition time, so they may not be right for you if you are looking to exit your practice quickly.

DSO offers can be complicated, and some dentists don’t fully understand what they are agreeing to in terms of equity and production-based earn-outs. Generally, doctors receive 51 to 80 percent of the sale price at close with the rest paid at a future date. You may be better off selling to a private buyer if you prefer a clean transition where you receive the full proceeds at once.

DSO sales have pros and cons. Each individual doctor, corporate group and offer is unique. Make sure you enlist the expertise of an experienced practice broker to help you evaluate your options and create a competitive situation.

The team at Menlo Dental Transitions has reviewed hundreds of DSO offers and has represented many practice owners as they navigate these transactions. Contact us to discuss your options or request a practice appraisal to understand what a DSO can realistically offer you.