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Navigating the Decision: Selling a Dental Practice to a Dental Support Organization (DSO)
By Rod Strickland, DDS | Legacy Practice Transitions
The decision for a dentist to sell their practice to a Dental Support Organization (DSO) can be pivotal, involving careful consideration of both benefits and drawbacks. As the dental industry continues to evolve, the rise of DSOs has presented an attractive exit strategy or partnership opportunity for many practitioners. However, understanding the implications—both positive and negative—is crucial for any dentist contemplating this significant change. This article delves into the pros and cons of selling a dental practice to a DSO, providing insights to help dentists make informed decisions.
Pros of Selling to a DSO
1. Reduced Administrative Burden
On the surface, one of the most appealing advantages of partnering with a DSO is the significant reduction in administrative duties. DSOs manage the business aspects of the practice, such as billing, payroll, HR, and compliance. This shift allows dentists to focus more on patient care rather than the day-to-day operations of their practice. While most DSO’s promise reduced administrative burden, many dentists find they are still mired down with day-to-day management issues to their dismay.
2. Access to Advanced Technology
DSOs often have the capital to invest in the latest dental technology and infrastructure improvements. This access can greatly enhance the quality of care provided to patients, improve operational efficiencies, and keep the practice competitive in a rapidly advancing field.
3. Financial Benefits
Selling to a DSO can offer immediate financial gain and relieve the financial risks associated with running a private practice. It can be particularly beneficial for those nearing retirement or dentists who are looking to secure their financial future without the unpredictability of maintaining a business. But, one particular item to study is the reduction in your yearly pay post-sale verses pre-sale. Many dentists find that they are required to take a significant pay-cut. Multiply this by 3-5 years and sometimes they feel that they were just pre-paid on future income and after 3-5 years they are not nearly as ahead financially as they had wished.
4. Professional Growth Opportunities
Being part of a larger organization can open up avenues for professional development and career progression that might not be available in private practice. Dentists can benefit from networking opportunities, mentorships, and even positions with greater responsibility within the DSO structure.
Cons of Selling to a DSO
1. Loss of Autonomy
One of the most significant downsides of selling to a DSO is the potential loss of control over practice decisions. While some administrative tasks are handled by the DSO, strategic decisions about services, pricing, and patient care protocols may also shift away from the dentist. This can be particularly challenging for those who value independence and have specific ways of managing their practice.
2. Potential Cultural Shift
Integrating into a larger organization can lead to significant changes in workplace culture and dynamics. The change can affect staff morale and the overall patient experience, especially if the DSO’s policies differ substantially from the existing practices.
3. Variable Financial Arrangements
While the initial payout can be substantial, the long-term financial arrangements can vary. Some contracts may involve performance-based pay or caps on earnings, which might not align with the dentist’s expectations or potential earnings if they had remained independent.
4. Binding Contracts
Contracts with DSOs can be complex and binding. They often include non-compete clauses and other terms that can limit future professional flexibility. Understanding these terms thoroughly before signing is crucial, as they can have long-lasting implications on a dentist’s career.
5. Who’s your boss?
A dentist sold their dental practice to DSO “A” because they resonated with and believed in the DSO’s mission and values. However, the primary objective of a DSO is to eventually sell itself to a larger DSO, benefiting financially along with its shareholders. When this sale happens, the new DSO becomes the owner of the dental practice, leaving the dentist without any control over the new DSO’s mission and values. If this sale takes place while the dentist is still under contract and the new company’s values don’t align with the dentist’s, it could lead to significant disappointments.
Conclusion
Selling a dental practice to a DSO is not a decision to be taken lightly. It requires a comprehensive evaluation of how such a move aligns with personal, professional, and financial goals. Dentists must consider both the immediate benefits and the potential long-term impacts. Consulting with financial advisors, legal counsel, and Legacy Practice Transitions who has experience with DSOs can provide valuable perspectives and help dentists navigate this complex decision. Ultimately, the right choice depends on individual circumstances and the specific terms offered by the DSO.
With over 100 years in the fields of dentistry, practice transitions, consulting, and financial planning, Legacy Practice Transitions is devoted to helping you achieve the best possible dental practice transitions as a buyer or seller. Our Practice Transition Consultants will assist you in determining your personal and professional needs, make sound recommendations on appropriate transition programs, and provide comprehensive support at every step.
For a personalized consultation and to explore your options with seasoned professionals, reach out to Dr. Rod Strickland at (843-501-2030) or via email at Rod@LegacyPracticeTransitions.com
