DSO Dental Sale - Sell a Large Dental Practice
If you are the owner/owners of a large, successful dental practice and are looking to sell, your best option is with a DSO, AKA Dental Support Organization.
Building a large, successful dental practice didn't happen overnight, it took years of hard work and dedication.
The overwhelming advantage goes to transtitioning out with a quality DSO, rather than attempting a private sale.
Below is an overview of frequently asked questions about DSO's. Click the headings to reveal the details.
- What is a DSO - What Do They Do?
- An internet search will turn up misleading information like this - "DSO's provide non-clinical administrative services to dental practices that are 100% owned and controlled by licensed dentists." A DSO is often referred to as a Dental Support Organization.
That is no longer true in most cases. In simplest terms, DSO's buy out dental practices for top dollar, with an 80% down payment for a successful practice. The seller retains 20% ownership, and he and his staff remain in place for, typically, two or more years. The DSO always retains the accounts receivable one day after closing. so, DSO's do provide non-clinical administrative services, but mot in an ownership capacity, not as an outsourced service.
DSO's are well funded buy out entities whose gradual "transition" strategy can be summed up as "continuity" - avoiding an abrupt "reflagging" and re-staffing of the practice, essential to retaining the existing clientele going forward.
- Who Qualifies for a DSO Dental Practice Sale?
- DSO's are only interested in practices grossing over a million dollars. Preferably 1.2, 1.5 and much higher. If you have a lot to offer them, they have a lot to offer you!
They require a seller and his staff to stay on for two years, maybe more. For this unique arrangement, they pay top dollar.
- Main Advantage of Selling to a DSO - Short Answer!
✔ DSO's pay a lot more than private sales!
✔ The larger your dental practice, the fewer qualified private buyers there are.
✔ Large private deals often fall through at the financing stage - DSO sales do not!
- Why is between 10% - 20% of the Purchase Price "Held Back?
- The traditional dental practice "transition" had loose ends. In a perfect world, a startup dentist buys part ownership in an ongoing dental practice, and over time becomes established and buys out the remaining share, assuming full ownership. The senior dentist then fades into the sunset.
Historically, some senior dentists have had a change of heart, decided to stay on and not turn over the keys, so to speak. A DSO sale is structured to protect ALL parties. You may loosely compare the hold back money to a lien on a mortgage, insuring both parties against lack of fidelity to the precise terms agreed upon.
- Why Is the Seller Required to Stay On For Two - Three Years?
- The seller and staff stay on for a progressive transition of ownership, and are paid a salary based on earnings at the time of the sale. The purpose of this is to phase out the senior dentist(s) over time, rather than a sudden, abrupt takeover. Sudden takeovers drive away clientele, and a loyal clientele is definately a major asset in valuating a successful dental practice. The staff stays on as well, and may decide to continue on after two years with the new ownership.
Sellers and their staff stay with the practice as employees, and can obtain health insurance, a 401(k), profit sharing contributions and other fringe benefits.
The DSO assumes managerial functions and the dentist is now free to simply practice dentistry for the duration. It will be the easiest two years of his/her career! Some sellers even choose to continue working for the DSO after the agreed upon time frame. Having banked the money for the sale, and shed the hassles of ownership and management, just being a dentist again may even feel like being semi-retired by comparison.
- How Can I Make Money on the "Hold Back?
- The seller can make money on the hold back if he gets premium shares in the DSO stock. Also some DSO's let the doctor maintain 20% of his own practice and therefore the seller/doctor could make some profit on that 20%.
Dr. Gary's expert team will represent your best interests, and guide you to the best options.
- How Much Commission Do I Pay?
- Dr. Gary' organization only handles dental practice sales/transitions where the DSO pays the intermediary commission. The answer to how much commission? - is nothing!
In some cases, even the legal fees are paid for you.
- Why Choose Dr. Gary DDS to Broker My DSO Dental Practice Sale?
- The answer lies largely in the "DDS". Dr. Gary is one of you! He had a successful dental practice, went through all you have gone through and speaks your language. Now he is the leading authority on brokering dental practice sales. Dr. Gary is a unique entity - he is a Dentist and a Business Broker - he has one foot firmly in each stirrup!
Dr. Gary's organization has a retinue of DSO's on hand that he deals with on a regular basis, and can choose the perfect one for your practice.
Dr. Gary, personally, will be your "native guide" through every step of the transition. Remember, he's a dentist too!
He also runs the only Dental Practice Brokerage that has eight on-site support employees, including two CPA's.
- Why can't I just go direct to a DSO myself?
✔ If your practice qualifies for a DSO sale, you are talking a very major transaction. Picking the right DSO to properly reward your assets and offer you the right choice of options is no job for the uninitiated.
✔ You save zero money taking big chances and going it alone! If you go with Dr. Gary's organization, you pay no broker commission. Dr. Gary has a special, ongoing relationship with his stable of DSO's, and knows which one is the best fit for you. No commission, and in some cases, even attorney fees are reimbursed at closing.
✔ You'll need someone who knows dentistry, as well as the complex world of transferring ownership of a business. Dr. Gary's organization has an entire staff to help you make all the right choices.
✔ Dr. Gary's Team is privy to information before it hits public disclosure. They will know if a particular DSO is having financial trouble. People outside the loop could be caught totally blindsided. In addition if you decide to negotiate directly with a DSO, there is no expert intermediary in the event negotiations break down. The only person who can help you is your personal attorney, who has no relationship with the DSO. More likely than not, also foreign to the Dental industry. Dr. Gary and his team have often been called in to save a deal from falling through.
The Larger Your Practice Is, the Smaller the Pool of Qualified, Reliable Buyers Gets!
Selling to a private buyer has many hurdles to overcome, not least of which is financial resources. Private buyers have to be found one at a time, Dr Gary has a group of DSO's Available full time and one is sure to be a perfect fit for you.
Dr Gary has a diverse retinue of DSO dental acquisition companies qualified to buy a large practice quickly and quietly.
ADVANTAGES of a DSO Dental Sale:
- Your practice will net a much higher sale price than a private sale
- You Pay No Commission - the DSO pays Dr. Gary
- Dr Gary maintains a close, special, and ongoing, affiliation with his retinue of DSO's. In some cases, he may even be able to have your legal fees reimbursed at closing!
- You, and your staff stay on for, typically, two years. You phase out gradually - not shocking a loyal clientele and sending them running.
How Does a DSO Dental Practice Sale Work?
Dr Gary speaks your language, AND the language of the DSO's, His organization maintains a diverse array of DSO's for a variety of options - they are all different in one way or another. Dr.Gary truly is a 'matchmaker' and will find the perfect fit for you.
- A DSO will generally buy practices grossing over a million dollars. Preferably 1.2, 1.5 and much higher
- A DSO wants the seller, and staff, to stay on as employees a minimum of two years
- A DSO bases their purchase price on a multiple of EBITDA [Earnings Before Interest, Taxes, Depreciation, Amortization] – a multiple of 4, 5, 6, or 7 times that number - factoring in the salary of the doctor/seller staying on. Staff and associates would also stay on,
FOR EXAMPLE: A practice grossing between a million and 1.5 million may have a true net profit of $325,000.00 - Multiply the $325,000.00 by 6, and $2,070,000.00 becomes the purchase price.
Of that purchase price, THE DSO will hold back between ten and twenty percent. In our example here, that figure would be $415,000.00. The doctor will receive eighty to eighty five percent of the sale price, at closing. The remaining money, about $415,000.00 will be held back and not released to the doctor until the two year time period is up - based on continuation of the revenues at the time of sale. Some DSO's may offer to slowly release that money over the two years.
The Holdback: Short answer
Some sellers choose
This is a logical mechanism for guarantee of fidelity to the agreement. The DSO pays handsomely for a quality Dental Practice and expects some guarantee that the seller will complete the agreed upon phasing out of ownership of the practice. Good faith begets great profit!
to invest the hold back money in stock in the DSO making the purchase. The seller stands to net 2 to 2 ½ times the original amount, There’s more money to be made with a DSO than an outright sale to a private party. Dr. Gary will guide you through the entire process.`
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One often overlooked perk in selling your practice to a DSO... is the ability to come up with capital for a new investment or business opportunity, while maintaining a stable income base as long as needed.
Many entrepreneur types reaching retirement age want to slow down, but are not yet ready to be put ""out to pasture"".
You can safely reboot your life in your own, less stressful, "field of dreams" - that thing you always wanted to do, that didn't come with the fat bottom line of a busy dental practice. You have earned the right to life - on your terms!
You can literally cash out early, get your principal back and still make a successful dentist's salary as long as you desire - all without the day to day hassles of running the business!.