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Planning Dental Practice for Sale by Owner Can be Daunting. Take our Quiz to See if You’re Ready.

If you’re considering selling your dental practice without the help of a professional, take this quiz to make sure you’re both physically and mentally ready. The key is to be able to answer all these questions as “true.” If you go through the quiz and you have concerns, you may want to consult an ADS broker.

Dental Practice for Sale by Owner Quiz time!

Want to Sell Your Dental Practice Without a Broker? Answer These Questions to Make Sure You’re Up for the Task

  1. There will be lots of buyers. I already have some in mind.
  2. I know what reports and financials are needed to provide to buyers and their lenders.
  3. I refer a decent number of procedures out. Buyers will see the potential and be willing to pay for the growth.
  4. I know what EBITDA is and why it is important to a practice valuation.
  5. Articles suggest that a revenue multiplier is the best way to value a practice.
  6. As a business owner, I need to make any normalizing adjustments.
  7. My labor costs and operating expenses are in line with the industry.
  8. My insurance plans are up to date and my fee schedule was recently updated.
  9. Annual production and collections are the most important things to buyers.
  10. Smaller practices are easy to sell because the buyer can grow them.
  11. Larger practices are easy to sell because there is so much cash flow.
  12. Student loan debt makes it impossible for buyers to get 100 percent financing.
  13. What will lenders need in order to underwrite the loan?
  14. Letting a prospect “shadow” you for a few days is a good idea and very common.
  15. After you accept an LOI, it’s a done deal.
  16. What is involved with due diligence and how long should that take?
  17. Is the accounts receivable part of the deal? I’m excluding the accounts receivable from the purchase.
  18. What happens to leased equipment in your office?
  19. Landlords are generally willing to create a new lease in your buyer’s name.
  20. I have an attorney who will prepare the purchase contracts.

Maximize Your Sale Price if You’re Planning a Dental Practice for Sale by Owner

The above list could go on and on as there are literally hundreds of questions and, depending on the answer, there could be many more. The goal is to maximize your sale price while selling your practice to someone who will take care of your staff, your patients, and your legacy.

To avoid a potentially costly mistake, take the time to speak with one of our experienced and competent brokers. We will be happy to help you answer any tough questions and guide you through a more confident, lucrative and as painless as possible sale.

Doug Sellan is a Transitions Consultant and is a member of PMA Practice Transitions.

Buying a Dental Practice? Consider Asking These Questions First.

If you’ve decided to buy your own dental practice, there are some important questions you may want to consider asking the seller, once you’ve found a practice you’d like to purchase. It’s important to be prepared for what is ahead. Your best option is to surround yourself with an experienced team of professionals, in addition to your broker, like a CPA and attorney who specifically focuses on dental. These professionals will help you avoid overlooking important items.

Understand the basics.

However, even though you’ve hired a team for their expert assistance, as a buyer, it’s still critical to understand a few basic questions to ask. For example:

  • What is the overhead and profit margin in the practice?
  • What procedures are referred out?
  • How many active patients are there, and what is the average number of new patients per month?
  • Ask for the number of active patients when buying a dental practice

  • Are collections back on track in 2021, as compared to 2019, given that 2020 was an off year due to COVID?
  • Are you open to a transition period of a few weeks to complete treatment in progress and provide mentoring?

    Making the right decision

    Buying a dental practice is a complex process that involves far more than finding a seller and closing the deal. It’s important to have all the background and solid guidance. You want to find the right seller who has a practice that fits your dream.

    You’re ready to sell your practice and you want the best result possible, so common sense tells you to list your practice with as many brokers as possible. It only makes sense, right? When I am contacted by these sellers, they are often surprised by what I have to say.

    Work with several brokers during when selling a dental practice.

    My best recommendation for sellers is to interview several brokers and pick the one they trust most. That is, trust them to be the best at their job, trust them to be honest and then give this broker an exclusive listing to sell their practice … even if this broker isn’t me.

    Two people having a discussion in an office setting..Let’s stop and think about this process a moment. First, all buyers are likely to speak to brokers who have a desirable practice, so all brokers will be talking to the same prospects. Why? Because we all fish out of the same pond. You will have three different brokers telling three different stories about your practice to the same prospect. Sometimes, this can leave the prospect confused, and they may well just dismiss your practice and move on. Too many cooks and brokers really do spoil the broth.

    This gets extremely complicated when some brokers update the listing with new financials and others don’t. I saw one sale where one broker updated an up-and-coming practice and got a full price offer for it. Then the buyer saw the other broker’s ad with a price that was $100,000 less because that broker failed to update the figures. The outcome was that the seller had to accept the lower price because his other broker advertised it for less.

    It’s important to know many brokers deal primarily with exclusive sale listings.

    Why would I want to spend my time, money, and effort to sell a practice only to have the owner or another broker sell it? I would receive nothing but an expense. This is especially true when I have clients who have committed an exclusive agreement to me, and they expect and deserve my commitment in time and effort back. I’m happy to honor that exclusive listing because I know when a sale takes place, I’ll be paid for my efforts.

    Person signing a document.If you look at a broker’s priority list, the exclusive listings are at the top and non-exclusive ones are on the bottom. When you have an open listing, you will be on the bottom of everyone’s list. You would be better served being at the top of an excellent broker’s list. One with whom you share a sales commitment.

    When I used to accept open listings, I discovered I was not only competing with other brokers, but also the owner who had the advantage of bargaining with my commission to get a better price for themselves. I quickly discovered when I competed with my client, I always lost. I did the work, and he got the benefit … so I stopped doing that.

    Brokers want to be compensated. Even if they didn’t make the sale.

    Don’t be surprised when a sale takes place that several brokers will claim that they were the one who brought the buyer to the table, and they all want their commission. Good luck convincing them that you’re not going to pay them.

    If you want the best exposure, find a broker with a national access to buyers and who can collaborate with other brokers. I have shared commissions with other brokers who referred a client and was able to maintain all the advantages of an exclusive listing while getting the greatest exposure to buyers. But there’s no question that sellers and brokers get the most benefit when there is only one captain of the sales ship.

    Earl M. Douglas is part of ADS-South Dental Practice Sales and is a member of ADS Transitions

    Be Sure to Ask These Six Questions When Considering Selling to a DSO

    In the first 25 years of our company’s history, dating back to 1993, 100 percent of our transitions were from one solo practitioner or partnership to another. For some buyers, this might have been their second, third, or even fourth office – but they were all dentists who would have direct involvement in the practice they were buying.

    The final act of each closing was to take a picture of the selling doctor handing the keys to the buyer, smiling faces all around as one dentist passed his or her legacy on to the next buyer.

    The Types of Dental Practice Sales Have Changed Over Time

    The last several years indicate these types of closings will be less and less common as DSOs – dental service organizations – become a larger segment of the buyer pool. DSO penetration here in the Central Plains has lagged other parts of the country such as Texas, Florida, Colorado, and the Northeast, but it’s safe to say private equity-backed dental groups are here — and they aren’t going anywhere.

    According to a recent presentation by Aligned Dental Partners, DSOs are expected to represent nearly 30 percent of all dental practices by the end of 2021, with the following breakdown by size:

    • Elite Groups (75+ locations): 39
    • Mid-Market (10-74 locations): 265
    • Emerging (1-9 locations): 1,239

    DSOs are expected to represent nearly 30 percent of all dental practices by the end of 2021

    What is a DSO?

    A DSO (Dental Service Organization) is a structured organization that helps manage administrative tasks for dental practices such as billing, support, training, and more. The dental The DSO model goes back several decades, but it wasn’t until the mid- to late-1990s that pioneers such as Heartland and Aspen began to emerge at scale. It is the recent rapid expansion of the Emerging and Mid-Market groups that are now making the biggest waves and presenting more intriguing options to potential sellers. While most of these groups would still prefer for the seller to continue working, many of them are associate-driven or have local equity partners that may make it possible for the doctor to sell and not have to continue working for three to five years.

    DSO’s Vary

    Most dentists over the age of 55 are bombarded with daily direct mail and other solicitations about how they can sell their practice to these organizations. Given the wide range of DSOs and their unique cultures, practice philosophies, support services, reputations, and financial outlooks, it is important for dentists to conduct their own due diligence as they start to go down the path of selling to a DSO.

    Here are six important questions to ask if considering selling to a DSO.

    Three members of a dental office

    1. Are there traditional buyers for my practice? If there is significant demand in your market for practices like yours, then you have options beyond selling to a DSO. Don’t buy into the rhetoric that young dentists aren’t buying practices anymore because they can’t get financed or any of the other reasons being thrown out there. There are plenty of eager, financeable buyers actively looking to get started as an owner operator. It is important to understand the market and know the different choices you have to exit your practice. Depending on your goals, a DSO could still be a solid choice, but certainly not your only choice.
    2. Do I fully understand the terms within the offer? There is a perception that DSOs will pay a significant premium on the practice purchase price compared to a private buyer. While this can be the case, doctors need to look at the full picture to see if it is as great a deal as it may seem. Is the purchase price paid in full at closing or is there a hold-back or earn-out? How will you be compensated for the work you do post-closing? Will some of the purchase price be structured in stock instead of cash? There are countless ways to structure these deals, so be acutely aware of the components in the offer beyond the purchase price.
    3. Am I required to work for any period after closing? Flexibility with your willingness to work post-closing expands the number of DSOs that may purchase your practice. The fine print in the employment agreement may be the linchpin that either makes the deal worthwhile, or a poor decision. Unless you are fully confident that you can endure the three to five years that most DSOs are looking for, you may want to pursue other options, where your payout does not have employment demands attached to it. As mentioned earlier, some of the smaller and emerging DSOs are beginning to shift away from retaining the seller as a requirement, so an increasing number of exit options may be available.
    4. What short-term and long-term changes can I expect to see? Most DSO-acquired practices should expect to see an immediate shift into the DSO’s centralized support services, which often includes changes to practice management software, operating hours, payor mix, dental supplies, labs, etc. Expect a rebrand to happen within the first 12 months. Be sure to understand the DSO’s clinical philosophy and approach to treatment planning, as this would have the most direct impact on staff and patients.
    5. What will happen to my staff? Most of the time, the DSO hopes to retain the staff. They are also able to offer the staff certain benefits that a solo doctor rarely, if ever, can provide. Still, you need to understand any changes to headcount or compensation.
    6. What would previous sellers say about their experience with the DSO? Ask to speak directly to other dentists who have sold to the DSO. Find out if they had a positive experience and if their staff and patients have been treated fairly.

    In today’s rapidly changing market, dentists have numerous options to sell their practices, yet most do not know where to start or what is involved. ADS transition specialists are uniquely positioned to leverage their experience in the marketplace to help sellers explore these various options to achieve the things they want most: legacy preservation, competitive pricing, staff protection and the right dentist or group to take over the practice. Whether that is selling to a DSO or finding a more traditional owner operator, your local ADS consultant can guide you through the process.

    Thomas Wolff is part of ADS-MidAmerica Dental Practice Sales and is a member of ADS Transitions.

    Do you know the value of your dental practice if something were to happen to you?

    It’s important to know the value of your dental practice. We are emerging from the most surreal time that we are likely to ever encounter in our lifetime. All of us have paused to reflect on what has happened and what to expect next. For many of us, it has been the unexpected deaths of loved ones. The dental profession has been touched by these losses as well.

    The core of a dental practice is the dentist. So, what happens when the owner dentist is no longer able to operate their practice? Patients are not being seen and treated, and what was once a thriving practice can quickly become merely a closed office.

    Have you given much thought to how your loss would affect your survivors? If something happened to you tomorrow, would your loved ones be prepared to take the appropriate steps to efficiently and quickly sell your practice for its highest value?

    Plan for the future

    Knowing the value of your practice is not only essential for planning your practice sale and retirement, but also for estate planning, and most critically for being prepared in the event of a death or disability of the owner.

    Valuing your dental practice for the first time.

    Having your practice valued for the first time will be a daunting task. The amount of information that is needed for a professional valuation is considerable. You will be gathering tax returns, profit and loss statements, equipment lists, employee information, insurance plan details and much more information about your practice. It is literally a cone beam analysis of your practice. Also, this information will be required to market the practice most effectively by buyers, their advisors and lenders in order to be able to bring a sale to its conclusion.

    Know the most current practice valuation

    In the event of an unexpected loss of an owner dentist, if there is not a current valuation, at least within the calendar year or preferably semi-annually, this critical process must be accomplished by survivors who don’t know what to look for, where to look or who to call for help. Their attention is focused on grieving and making arrangements, so it’s no wonder many valuable dental practices are sold at fire sale prices, if at all!

    I recently had this exact situation happen when the surviving spouse reached out to me, not knowing what to do. Another dentist in the area offered her what she felt was a ridiculous price for her husband’s practice. She had no idea what the practice should be worth, much less what the gross collections were. Know your the value of your practice by keeping up with a checklist.In addition, the practice had been closed due to the loss for weeks with no plan in place to re-open and the employees had already found other employment. As it turns out, the offer she received was actually a decent offer, due to the current status of the practice. If her husband had a valuation performed and updated yearly, and provided a contact to sell the practice, search for locum tenens dentists, and market the practice broadly, the outcome would have been much better for her.

    “Free Appraisals”

    Some practice transition consultants will offer a “Free Appraisal” or “Free Valuation” of dental practices. This is most likely an Opinion of Value based on a Rule of Thumb method rather than an actual valuation. To know the value of your dental practice, it’s important to understand the difference between the two.

    The Rule of Thumb valuation methods

    To arrive at a value, a Rule of Thumb uses limited information accomplished my multiplying the gross revenues by an arbitrary percentage. “The practice is worth 70 percent of gross revenue,” or “The practice is worth one times net income,” are the most prevalent rules of thumb. Neither of these methods accurately reflect the worth of any practice, much less all practices.

    A dental practice valuation is based on a great deal of extensive practice information and is presented in a professionally written report.

    Prioritize Getting a Professional Practice Valuation Annually.

    When you reflect on Who am I, really?, What worries me most about the future?, or What matters most in my life?, as uncomfortable as it is, reflect on What would happen if all of a sudden I am not here? Get a professional valuation performed by a professional transition specialist and have it updated at least annually. Having all of this information on hand and instantly available will relieve your survivors of a tremendous amount of stress and frustration.

    Christine Elliott, Lic. R.E. Broker, is a dental transition broker with The Transition Group, LLC and a member of ADS Transitions.

    Due diligence is a phrase becoming more commonly used by buyers in the market. However, it does mean different things to different people.

    Typically, when marketing a practice, prospective buyers visit the office and meet the seller. If they are interested, the broker will send financial statements and additional data. This is enough to make an offer in most cases. In other cases, the buyer may request additional information.

    Once the offer is accepted, the contract phase begins. Now, in the majority of new contracts, there is a clause stating a period of time must be set aside for “due diligence.” During this time, the practice must be taken off the market and no other offers may be considered.

    There are many things that are measured during a “due diligence” audit. For example:

    • At least three years historical tax returns and financial statements, including the most recent interim operating income statement
    • A complete inventory of all furniture and equipment being sold with the practice, including their depreciation schedule
    • Staff details, including salaries, benefits and length of service with the practice
    • Complete access to all patient records
    • Access to all insurance plans the practice is involved with
    • The reason why the practice is being sold
    • A copy of the draft letter (from the seller), introducing the new buyer to the existing patients after the dental practice transition
    • AR/Aging Summary
    • Production by procedure and category reports
    • Office lease and addendums
    • Lists of contracts for the practice
    • Fee schedule

    In most situations, all the pertinent information has been provided before the offer was made. A buyer doesn’t need a 90-page redacted report of every patient of record prior to signing the Asset Purchase Agreement. Lenders typically only need tax returns and a YTD P&L to obtain financing. In some situations, the lender will ask for a little more. Buyers should be focused on credentialing (in practices that participate with PPOs), as that is one of the most time-consuming pieces of the transition puzzle.

    While making sure you know what you are buying is important, buyers should understand that many of their “advisors” are charging them by the hour and “due diligence” can be costly. At the same time, deals fall apart when sellers experience “deal fatigue” and choose to “fire the buyer.” When requests become overly burdensome, sellers retain the right to walk away before a deal becomes binding.

    “Due diligence” is becoming more and more prevalent in the buying and selling process. Accepting it as a new way of doing business seems to be the best course of action. If done correctly, it can provide a positive level of transparency for both the buyer and seller.

    Learn tips for attaining and retaining employees.

    Many dental offices are finding it harder than ever to find long-term (or even short-term) employees who are ready to work. Historically, employees rarely left — from front desk employees, dental assistants to hygienists — we’ve entered a new era of having to do more to retain employees.

    To ensure you carry on with your practice as uninterrupted as possible consider these ideas to boost your hiring and employee retention efforts:

    Dentist and staff talking together

    1. Offer prospective employees sign-on bonuses or increase wages of your current team. Offering a prospective employee, a sign on bonus could be the extra factor for someone to select your position over a competitors. Review your team’s salaries and see if you have room to adjust wages to gain a competitive edge.
    2. Provide growth opportunities like employee training and continuing education to help your employees grow in their roles. Create apprenticeships. If you’re getting applicants who are underqualified, try providing them with the training they need. You may just find a diamond in the rough.
    3. Keep people motivated in a positive environment. Some ways to do this include upgrading equipment, renovating the practice, and even just taking the employees to breakfast or lunch on occasion.
    4. Communicate. Let employees know they are being heard, and they’ll feel a stronger connection to the practice.
    5. Employee recognition. Regularly recognizing employees for their contributions to your practice will motivate them and others. Celebrate anniversaries and birthdays on social media. Drawing attention to these milestones helps build that foundation of loyalty.

    These are just some of the ideas dental practice owners are using to find and retain employees. Most importantly, remember to keep an open mind and be ready to be surprised. Use these ideas to hire your next amazing employee!

    There are many reasons why dentists might want to have their practices appraised.

    Some of these reasons include:

    • Sale or purchase
    • Associate buy-in
    • Partner buy-out
    • Mergers
    • Death or disability
    • Estate value
    • Divorce

    No matter what the reason for the sale, it’s important to understand the term “value.”

    There are three values for most dental practices:

    • Seller’s
    • Economic
    • Market

    The purpose of this article is not to provide formulas for determining these values, but to discuss their meaning.

    Dental chair

    Seller’s Value

    This is what most sellers apply to their practice. Whether it is relative or not will depend on the seller. Some sellers underestimate the value of their practice because they don’t have a clear idea of its true value. They know there is value in the tangible assets, but they often look at the replacement value, which is clearly not the value of existing equipment in any practice.

    They then add value for goodwill, which is realistic. What is not realistic is adding value for the “blood, sweat, and tears” a dentist has put into his or her practice. Also unrealistic is adding an additional value for “building out” a new facility. Although there is value in the owner’s time and energy, it is not something a typical buyer is willing to pay for when purchasing a practice. In most situations, the seller’s opinion of value will be the highest and most unrealistic assessment.

    Economic Value

    It would stand to reason that the economic value of the practice would reflect the most reliable value. This number is arrived at when a dental practice appraiser, who thoroughly and objectively reviews practices, is hired to determine value. The major components making up this value are the tangible assets (dental equipment, furniture, fixtures, and office equipment) and intangible assets (goodwill).

    When assigning value to tangible assets, appraisers consider the age and useful life of the equipment. Tangible assets fall between depreciated book value and replacement value and an economic useful life, to which a representative value is applied. Intangible value is determined by goodwill, which is comprised of location, active patients, staff, cash flow, and other factors.

    The ultimate economic value of the practice is based primarily on the metrics generated — active patients, gross receipts, and most importantly, adjusted net income or cash flow. Once these factors are reviewed, the appraiser will render his or her opinion regarding the value of the practice.

    From a pure numbers standpoint — and viewing the practice as an isolated asset — this opinion of value may be accurate, but unrealistic.

    Graph with lines going up

    Market Value

    Two practices with nearly identical financial numbers, equipment, physical characteristics, and staff may have similar values, but may not generate the same selling or purchase price. The market factor or market value will have a dramatic impact on the two practices. As in real estate, the mantra, “location, location, location” is all-important when viewing a practice. This is never more obvious than when practices are in rural areas verses urban areas, the right side of the tracks versus the wrong side of the tracks, or the “older” area versus the new growth area.

    Hiring an appraiser who is familiar with your area and who practices within that locale will help you determine whether you set a realistic value for your practice. The right professional is critical as you attempt to maximize your practice value. Pricing your practice to the market will ensure a fair price for both you and a buyer and will ensure a timely sale.

    The value placed on your practice must pass the “justification test.” After expenses, will it pay the debt service, provide adequate cash flow to the buyer, and withstand the need for future new equipment, as well as fluctuations in business cycles? Adequate cash flow is always relative to any buyer, but ideally it should be more than a buyer would earn as an associate to justify the risks that are part of any sale or purchase. If not, the potential for practice growth should outweigh the other risk factors.

    John M. Cahill, MBA, of Western Practice Sales, CA (member company of ADS Dental Transitions) has more than 40 years of experience in the dental industry, including all aspects of appraisals, sales, purchases, and buy-ins in connection with dental transitions. You can contact him at 800.641.4179 or info@westernpracticesales.com.

    As a Dental Practice Broker, I meet with dozens of private practice owners each year who feel as if they are getting closer to selling their private dental practice. The point in their career and the reasons why vary. In some cases, this may be in the next three to five years or it may be much sooner. In the initial conversation they always ask about today’s buyers along with several other questions which usually stem from an article, a post, a podcast, or something they heard at a conference. Having this face-to-face conversation, we get the opportunity to understand them better, answer their questions and educate on the various options.

    The Q & A goes like this:

    Is there a buyer for my office?

    Yes, No or Maybe. There are so many items to consider and to properly analyze, but rarely is the answer NO. Most likely there is someone, finding him or her will take some time and effort. Currently, there are 68 dental schools in the U.S. and Canada with over 6,500 new dentists graduating each year. Today’s graduates have, on average, $300,000 in education debt.

    How much can I sell my office for? What is it worth? My CPA Advisor said it is worth X%.

    Again, this requires not only a deep understanding of how to properly value a dental practice but also requires someone who is very familiar with the market. Most CPAs and Advisors have limited experience in valuing and selling a dental practice. Marketing your office, while maintaining confidentiality is essential.

    Can the buyer get financing? With so much student debt, I hear they can’t get financing.

    Financing is available provided they meet some reasonable requirements. There are several great lending options for today’s buyers with historical low interest rates. Seller financing is rarely required but remains an option with a variety of pros and cons.

    How long will this take?

    It could take every bit of six to twelve months and in some cases longer. Location, price, demographics along with a dozen other components might affect the timeline. A general dentistry practice located in a rural community will most likely take much longer to find a buyer than a practice located in a metro area.

    What about a corporate buyer, a DSO?

    That is an option. What do you know about DSOs? Let’s take a few minutes to scratch the surface on them and see if that is a path for you.

    Two dental practices with text Insights into DSO vs private practice

    What is a DSO?

    The Dental Service Organization dates to the 1970s. Dental Service Organizations, Dental Management Organizations and Dental Support Organizations are variations of the same. They provide support with human resources, marketing, branding, recruiting, IT service, payroll, capital, financing, tax services, accounting, risk management and practice support, to name just a few.

    Who do DSOs Employ?

    Aside from acquiring private practices, DSOs provide employment opportunities for new graduates. They have locations and opportunities. With a limited number of associate opportunities in private practices in the location that new graduates want to be, the DSOs provide an option for some. DSOs play a big part in employing new graduates and giving them experience essential for when they decide to pursue owning their own private practice. Most lenders usually require a new graduate to have at least one year of experience before they will provide financing.

    What is a DSO Appetite?

    Not every private practice is a candidate. Typically, there are several factors that have to be thoroughly reviewed. The first three major questions before any due diligence is performed pertains to the seller, facility and revenue.

    Is the seller willing and able to remain in the practice for a period of time? Usually a period of three or more years is required. Can he or she continue to produce at or above their current level?

    Does the current space have enough operatories and the necessary technology in place? Can the facility be expanded? Does the seller own the premises? What is the cost to update?

    Does the current revenue and demographics meet the standard that the DSO is seeking to add to their group? Depending on the location the revenue requirements may vary.
    Road that splits into 2 directions

    Private Practice Advantages

    As a private practice owner, you call all the shots, and you are 100 percent responsible for everything. This often creates somewhat of a family type of environment. You tend to focus on the relationship and well-being of your staff, and it isn’t always about the numbers. Obviously, the numbers are important, and some operate very successfully this way. Patients tend to have substantial trust in their provider and remain very loyal.

    Private Practice Disadvantages

    As a private practice owner, you are sometimes pulled from the primary responsibility which is caring for a patient to deal with an issue like HR, payroll, IT to name just a few.

    Taking time off for any reason scheduled or not usually means the office will be closed.

    Covid-19 has affected all businesses and many are still dealing with staffing issues and increased operating expenses. Patients have returned to the practice, but some employees remain at home and some have jumped to your competitors.

    DSO Advantages

    As a part of any large organization, you might receive a comprehensive benefit package including insurance and retirement benefits. Depending on the DSO, they may have a large team of associates and assistants to support you and to provide you the ability to take time off without having to temporarily close the office.

    Some DSOs invest in continuing education and skill advancement. This not only serves the dentist with essential ongoing training but may also provide the corporation the ability to expand certain services to patients that were previously referred out.

    DSO Disadvantages

    You may be required to sign a lengthy employment contract in order to receive your full purchase price. Some organizations offer investment and stock opportunities and interest earning options. Some of these payouts may be tied to the overall success and performance of the organization.

    Businesses need to be profitable and to do so there is a lot of focus on the numbers. New patients are essential and production reports are constantly being analyzed.

    Day to day HIPAA, OSHA, HR, maintenance, payroll and all the other non-clinical tasks and decisions may be totally out of your hands. For some, this might be an advantage but for someone who has owned and operated their own practice for many years not having any input and turning over the controls might be a challenge.

    What about your staff? Going forward you may have little to no input.

    What about your building? Most DSOs do not purchase buildings. You would not only be an employee but you might also be a landlord. This can be both a positive and a negative.

    Lastly what is your compensation? Going forward how will you be paid? What percentage? Percentage of what; collections, production, total office, including or excluding lab? How many years do you have to stay and what happens if you leave and what happens if you don’t meet or exceed goals? What about the stability of the DSO? What if they get acquired or what if they go under?

    Whatever path you think is right for you, it is essential you don’t do it alone. Having an experienced advocate makes everything better.

    To help you understand the different paths you can take, contact your local ADS Dental Transition expert and schedule a time to see what options are available for you.

    Doug Sellan is a Transitions Consultant with PMA Practice Transitions with over 30 years of experience in the healthcare industry.

    Whether you’re buying or selling a dental practice, one of the most important initial documents is an Offer to Purchase (OTP). This signed document lays out the price, terms, transition, and real estate (if applicable) of a practice being sold. Recently, we’ve seen buyers increasingly use a Letter of Intent (LOI) to make the offer, especially when the buyer is a corporation or a DSO. When an individual dentist is the buyer, however, a simple, one-page offer form is often all that is needed to agree to the basic terms of the deal and move forward. A broker is prepared and can easily create a personalized OTP document for you.

    Dentist shaking hands in front of dental chair

    One page is more than sufficient to lay out the basics of the deal, including:

    1. Buyer’s name & address
    2. Seller’s name & address
    3. Assets being purchased
    4. Assets not being purchased
    5. Price
    6. Terms of payment
    7. Transition details
    8. Real estate (if applicable)
    9. Contingencies
    10. Anticipated settlement date
    11. Signatures

    At this stage, regardless of the document that is used, from a simple offer form or a formal Letter of Intent (LOI), it is non-binding. The specific details will be worked out in the Asset Purchase Agreement (APA) by attorneys for both parties. The sooner the offer form is agreed to and signed, the sooner the buyer can secure financing, begin the credentialing process, give notice to an employer if necessary, and allow the attorneys to begin working on the APA and other contracts.

    A formal LOI often goes into more detail than is necessary in the early stages of a dental transaction. Also, it often involves the attorneys at an earlier point in the process, which can slow it down and lead to unnecessary costs for both parties.

    If you have any questions about how to structure an OTP, your ADS specialist is ready to help.

    Kevin Cooper, MBA, is a Practice Broker with American Practice Consultants.