If you’re thinking of joining a dental service organization (DSO), it pays to do some hard thinking about 1) what you want out of dentistry and 2) how the DSO you’re considering fits with what you want.
For the purposes of this article, let’s divide them into three types: the start-up DSO, the established DSO, and the acquisition DSO
DSOs are not created equal. The one thing that is true for all types is that they take over many or all non-clinical duties, allowing the dentist to focus on doing dentistry. Practice owners who wear way too many hats find that a very attractive proposition. But just as dentists vary in their resources and areas of expertise, so do DSOs.
The Start-Up DSO
Start-up DSOs are lacking in two key resources: capital and expertise. They have little to no track record in processing dental insurance claims, ordering supplies, or dealing with legal and HR issues. Start-ups may also have no equity position or access to external funding.
That’s not necessarily a no-go for a high-earning dentist. Dentists who join start-ups are basically injecting capital into the organization and claiming a role in decision-making. Considerable caution should be exercised when reviewing contractual terms and conditions as well as the management team’s resumes.
The Established DSO
An established DSO will typically have a proven track record of success in providing non-clinical management services to dental practices. It will also have capital reserves and/or ready access to funding.
Established DSOs may or may not want to purchase your practice; you’ll have to decide how you’ll feel about the prospect of no longer owning or making the decisions for the business you nurtured. And, the DSO may or may not want you to continue running the clinical side of things.
While the prospect of a big payout may be very attractive, this is an area where you’ll want expert legal advice in reviewing contract language to avoid nasty surprises.
The Acquisition DSO
The acquisition SEO is interested in purchasing dental practices; again, the dentist may be retained to continue in his or her role, or the DSO may bring in a different team.
Dentists who are considering selling need to realize the highest sale price possible as well as planning for the possibility that they’ll find themselves relatively wealthy, but unemployed.
It’s A Question Of Revenue
Joining a DSO, or selling your practice to one, is not a decision to be undertaken lightly. Consider your practice’s EBITDA – earnings before interest, taxes, depreciation, and amortization. That’s the most commonly used metric these days when determining the sale price of a dental practice.
If you’re looking to join a start-up, you’ll need revenue to pay off a loan or to replenish your cash reserves. If you’re looking to sell, the sale price will reflect a number of factors including your revenue for the last few years.
If you’re looking to improve your EBITDA, consider contacting SmartBox. Helping dental practices grow and thrive is what we do. In fact, over the last decade, SmartBox has generated $3.97 billion in documented new patient opportunities.
If you’d like to learn more about what SmartBox can do to help you grow your practice, schedule a Practice Growth Call. It’s not a sales call in any sense. You and Ashley Best – one of the top practice growth experts in the country on anyone’s short list – will discuss your goals, your current approach to marketing, your competition and what’s working (and not).
Following the call, an entire team of experts will prepare your Summary of Findings and your Practice Growth Roadmap.
Joining a DSO may be right for you, but only if you’re in a position to capitalize to the maximum extent by that decision.